Case Study

Property Business Demerger

For many years, one of our clients operated a family property investment business, made up of a number of valuable commercial properties.

The family decided that it was essential, within their estate plans for the two adult children, to earmark specific properties for each child.  Ultimately, the objective was to enable each of them to manage, retain or sell their own respective shares of the portfolio without recourse to the other for approval.  The two siblings having to work and make decisions jointly might have presented a conflict of interest in the future.

We were able to help the family to undertake a 'demerger' of the total portfolio into two separately held pieces, one in a company held by a trust for the first adult child, the other in a second company held by a trust for the second.

This had three advantages:

  1. The desirable division of assets between the two offspring was managed in a businesslike and controlled way (as opposed to a time of emotional stress; after a death, for example).
  2. By structuring the arrangements to access certain key reliefs under the relevant statutes, another key objective was reached. The reorganisation was accomplished with nil tax and nil Stamp Duty Land Tax.
  3. Furthermore, the arrangements we put in place uplifted the tax ‘base cost’ of the demerged properties to current market value, meaning that future disposals of these properties will suffer significantly less Corporation Tax than would have been the case otherwise.

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