Corporation Tax Act 2010 section 1077

Transfer by distributing company and issue of shares by transferee company

Section 1077 defines the second type of exempt distribution for demerger purposes, where a company transfers trades or subsidiary shareholdings to another company, which then issues shares to the transferring company's members.

• A distribution under this section involves a company transferring trades or shares in its 75% subsidiaries to one or more transferee companies, combined with those transferee companies issuing shares to some or all of the transferring company's members.
• For the distribution to qualify as exempt, conditions A to D (general conditions in section 1081) and conditions G to K (specific conditions in section 1083) must all be met.
• Where the company making the transfer is itself a 75% subsidiary of another company, additional conditions L and M (set out in section 1085) must also be satisfied.
• Only if all the applicable conditions are met will the distribution be treated as an exempt distribution, removing the normal tax charges that would otherwise apply to a distribution.