Jurisdiction(s):
United Kingdom

Key definition

Statutory demerger definition

What does Statutory demerger mean? In practice, a statutory demerger (also called a dividend demerger) separates a business by the target company distributing, by way of a dividend in specie, the shares of a subsidiary to its own shareholders so the split is tax‑neutral when statutory conditions are met. The expression is practitioner shorthand for demergers that satisfy the legislated exempt distribution regime in UK tax law (for example, under the Corporation Tax Act 2010) and the broadly equivalent Irish rules in the Taxes Consolidation Act 1997; it is not a Companies Act label. Key legal features typically include: a pro rata dividend in specie of...

Statutory (dividend) demergers: UK tax conditions A–M for exempt distributions (direct and indirect)

Published by a LexisNexis Tax expert

Practice notes

This Practice Note sets out the criteria a statutory (i.e. Dividend) Demerger, whether direct or indirect, must satisfy to qualify as an exempt distribution, thereby avoiding an income tax (or corporation tax on income) charge for shareholders.

For background on why a company might implement a demerger, and an overview of alternative demerger structures, see Practice Note: Demergers—an introduction to the tax issues.

For information on:

what a Statutory demerger is
the difference between the direct and indirect routes
the circumstances in which a company might choose to carry out a statutory demerger
the steps involved
the tax implications, and
why it is important for a statutory demerger to qualify as an exempt distribution

see Practice Note: Statutory demergers.

Direct demergers

The following conditions must be satisfied for the transfer of shares under a direct statutory demerger to be treated as an exempt distribution...

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Web page updated on 21/05/2026

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