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United Kingdom
United Kingdom
Key definition
Liquidation definition What does Liquidation mean? Liquidation (statutory term: winding up) is the formal process for closing a company, under which a liquidator takes control, stops or sells the business, collects and realises assets, adjudicates creditor claims and distributes proceeds according to statutory priority, before dissolution. It is used both on insolvency (to repay creditors) and, in a solvent members’ voluntary liquidation (MVL), to return surplus to shareholders. In England & Wales and Scotland, liquidation is governed principally by the Insolvency Act 1986 and associated Rules. The main routes are compulsory liquidation (winding up by the court), creditors’ voluntary liquidation (CVL) and MVL. In Northern Ireland,...
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Section 110 liquidation demergers: UK tax, required clearances, typical steps, stamp taxes reliefs and anti-avoidance, with degrouping and partition considerations
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Practice notes
This Practice Note is about the tax implications of liquidation demergers, also known as section 110 demergers, after section 110 of the insolvency Act 1986
This Practice Note examines the tax consequences of liquidation demergers, sometimes referred to as section 110 demergers, taking its label from section 110 of the Insolvency Act 1986. For context on the reasons a company may undertake a demerger, and an overview of alternative structures, see Practice Notes: Demergers—an introduction to the tax issues and Demergers—an introduction for corporate lawyers. Detailed Practice Notes cover the tax aspects of the principal demerger routes:
- statutory (or dividend) demergers, which can be direct or indirect—see Practice Note: statutory demergers
- capital reduction demergers—see Practice Note: Capital reduction demergers
- liquidation demergers—the focus of this Practice Note
Typically, a liquidation demerger involves placing a new holding company at the top of the group, then putting that new holding company into liquidation. The liquidator then transfers the businesses being separated to two new companies, and each of those companies issues shares to the existing shareholders. In contrast to a statutory demerger, a liquidation demerger does not benefit from the specific tax reliefs applicable to exempt distributions...
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Web page updated on 21/05/2026
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