Corporation Tax Act 2010 section 1081

General conditions

Section 1081 sets out the four general conditions (A to D) that must all be met for a company distribution to qualify as an exempt distribution under the demerger rules.

• All relevant companies must be resident in a member State at the time of the distribution, and the distributing company (and any subsidiary whose shares are transferred) must be a trading company or part of a trading group.
• The distribution must be made wholly or mainly to benefit trading activities that were previously carried on by one company or group but will afterwards be carried on by two or more separate companies or groups.
• The distribution must not form part of a scheme or arrangement whose main purpose (or one of whose main purposes) is tax avoidance, the making of a chargeable payment, or the acquisition of control of the distributing company or a related company by outsiders.
• A scheme aimed at the cessation or sale of a trade after the distribution will also disqualify the distribution from exempt status.