Millions of us have been watching The Great British Bake Off over the last few weeks, alternately laughing and crying with the contestants as they bake fabulous show-stoppers or produce undercooked, soggy-bottomed disasters. But this time there is also a sense of loss as the much-loved BAFTA-winning show moves from the BBC to Channel 4, leaving most of the original cast behind.
Such sad partings are actually very common in the commercial world: people who have gone into business together frequently reach a point where they want to move in different directions, and need to separate their interests. It may be that the business’s owners no longer see eye to eye and have fallen out, or it could be that their opinions differ about what direction their business should take. Alternatively, it may simply be that some areas of the business are more exposed to risk than others, so a spilt will help to address these different risk profiles.
And that’s where tax comes in, because without expert help, a division of a business in this way can lead to unexpected tax bills for both the shareholders and the companies themselves. We call these transactions “demergers”, although “division” is a better description. Demerging a business might sound complicated and daunting, but with the right tax advice, breaking up can be as easy as pie.
More recently, demergers have been made more difficult with some hardening of attitudes within HM Revenue & Customs and also because of recent changes to stamp duty. We have managed to develop mechanisms to ensure that these changes should not impact on commercial transactions, and we continue to engage with HMRC to try and reverse the worst effects of recent legislation.
The Miller Partnership has wide experience of dividing companies and groups into two or more parts, taking advantage of all the relevant tax reliefs and obtaining clearance in advance from HMRC. We can use our expertise to carry out these demergers by any of the known mechanisms – distribution in specie, liquidation or reduction of capital – and we can advise you on which one best meets your commercial needs.
We are currently helping a large UK engineering group restructure ready for a major investment by a European multi-national group. At the other end of the scale, we are working with a family-owned nursing home group to separate the valuable properties from the high-risk care business to protect its assets. Another of our recent successes was in separating a multi-million pound property portfolio between its shareholder families, so that one family could focus on the rental side of the business and the other could move into property development.
In all cases, we design the demerger in the most tax-efficient way, we explain the transactions to HMRC so that they can formally approve the tax treatment before we start, and we work with the client’s lawyers and accountants to make sure the tax outcome is what our clients expect. In every case, our timely intervention has allowed clients to fully exploit their businesses’ full potential.
Whether you are The Great British Bake Off or a family-owned business, please contact The Miller Partnership by phone or by email for more information. We can help you break up your business painlessly and effectively; in fact with our help it should be a piece of cake!
Direct Line: 0116 208 1020
Mobile: 07802 197269