Liquidating liabilities

KEY POINTS

• The point of a liquidation demerger
• Section 179 charges can be mitigated
• Effect of VAT and stamp taxes on liquidations
• Schemes of arrangement explained

The article Decoding demergers was a beginners' guide to the tax and commercial issues involved when advising on a demerger generally and went on to outline the technical issues associated with an exempt distribution demerger under TA 1988 s 213.

This article looks at the liquidation demerger typically carried out under Insolvency Act 1986 s 110 and briefly the demerger carried out as a scheme of arrangement under Companies Act 1985 s 425.

As discussed in the previous article the exempt distribution demerger is very tax efficient and can be relatively straightforward but its application is often frustrated in practice by...