Nick Wright sets out the tax mechanisms for splitting property investment companies, highlighting when capital reduction demergers can achieve a clean, tax-neutral separation and the key issues to consider.
Property investment companies are frequently established as long-term joint ventures. However, over time, shareholders’ objectives can change; one may wish to realise value, another to retain assets for income, family circumstances may change; or even worse, the shareholders completely fall out and cannot operate a company together moving forward.
Property is inherently tax-sensitive, and the interaction between corporation tax, capital gains tax, stamp duty land tax (SDLT) (or LBTT in Scotland and LTT in Wales) and company law means that demergers in this context are rarely straightforward. Advisers must therefore consider not only how to split the business, but
