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Running a business is not always a straight road. Over time, owners may want to Split Business or move assets into a new structure. Reasons vary: selling part of the business, protecting property, or reducing risk.
Can I split my business or property group? The answer is yes. But the procedure is complex. It involves legal steps, tax planning and agreement between shareholders or partners. Without expert guidance, you may face large tax bills, delays or even disputes.
This guide explains the main reasons businesses split, the legal and tax routes available, and what steps you need to take. It also answers common questions and shows how IBISS & CO can support you through the process.
Why Businesses Choose to Split
Splitting a company or property group is more common than you might think. Owners choose this path for several reasons:
Selling Part of the Business
A growing company may develop two or more divisions. One may fit your long-term plans. The other may not. In this case, a split allows you to sell or transfer the unwanted part while keeping the rest.
Protecting Assets
Property held inside a trading company can carry risk. If the trading side of the business faces debts, the property may also be exposed. Moving property into a separate company can protect it.
Making the Business Easier to Sell
Buyers often prefer a clear structure. If a company holds property, investments, or unrelated activities, a buyer may lose interest. Splitting the company makes the deal simpler.
Managing Shareholder or Partner Exits
Disagreements among commercial enterprise partners are common. Some partners may want to continue trading while others wish to exit. A split gives each to follow their own path.
Family & Succession Planning
Families often own companies with both property assets and trading. A split can help pass different assets to different family members in a fair way.
Transition tip: In short a split can protect, simplify and prepare your business for the future.
Legal Routes to Split a Business or Property Group
There is no single way to split a company. The best way to split will depend on what you want to achieve, the type of assets you hold, and the tax rules that apply. Here are the main options to consider.
1. Demerger
A demerger is when a business is formally divided, with parts of the company moved into separate new companies. It can be.
- Statutory demerger uses UK company law and HMRC reliefs. Often tax efficient.
- Voluntary demerger More flexible but may create tax costs.
Demerger is common when a company has both trading and property activities. For example the trading side continues in one company & the property is moved to another.
2. Asset Transfer
Instead of splitting the entire company. You can transfer selected assets. For example, you may move a property to a holding company. The trading side then pays rent to that new company.
This method is simple, but it can trigger tax charges. Stamp Duty Land Tax (SDLT), VAT and Capital Gains Tax may apply unless reliefs are available.
3. Share Sale or Buyout
Sometimes the simplest option is for one shareholder to buy out the other. If the company owns property, it stays where it is. This step avoids moving assets. But requires agreement on value and funding.
4. Holding Company Restructure
You can set up a holding company above your trading business. The property can then be moved into the holding company or placed in a new subsidiary under it. This method is useful for protecting property while keeping control within the group.
5. Liquidation and Reformation
In rare cases, winding up the company & starting again may be the best path. This approach lets shareholders divide assets between them. But they can often be expensive and disrupt the business.
Tax and HMRC Considerations
Splitting a business isn’t only about the legal process. Tax is usually the biggest issue to manage.
Capital Gains Tax (CGT)
Families often own companies with both property assets and trading. A split can help pass different assets to different family members in a fair way.
Stamp Duty Land Tax (SDLT)
When property moves between companies, SDLT is normally charged. Some reliefs exist, but they only apply if certain conditions are met. Reliefs may be available in group reorganisations, but again, conditions must be met.
VAT
If the property is opted to be taxed, VAT may apply on a transfer. You need to check whether the transfer qualifies as a Transfer of a Going Concern (TOGC), which can make it VAT free.
Corporation Tax
Transferring trade or assets between companies may create profits on paper. These profits are taxable unless relief applies.
HMRC Clearance
For many demergers, you can apply to HMRC for advance clearance. This confirms that HMRC agrees the transaction is mainly commercial and not just tax avoidance. Clearance gives you certainty before acting.
Transition tip: Always seek advice before moving assets. A step done wrongly can create large, unexpected tax bills.
Practical Checklist: Steps to Splitting a Business
Breaking up a company is not an overnight job. You need careful planning. Here is a practical checklist:
Steps to Split Your Business
Clarify Your Goals
Decide why you need to split. Protect property, prepare for sale, or settle disputes. Goals shape the route.
Value the Assets
Get up-to-date valuations of property, shares, and assets. Helps with tax planning and fairness.
Get Professional Advice
Seek advice from tax advisers, accountants, and solicitors. Both legal and financial expertise matter.
Choose the Right Approach
Decide if a demerger, transfer, holding company, or buyout suits your goals best.
Draft Legal Documents
Prepare contracts, deeds, and shareholder agreements to record the split clearly.
Seek HMRC Clearance
Where applicable, apply for HMRC clearance before finalising transactions.
Implement the Split
Transfer assets, register changes with Companies House, and update systems promptly.
Review Post-Split Structure
Check accounts, tax returns, and contracts reflect the new structure.
When Partners Disagree: Splitting After a Fallout
At times, divorce occurs unexpectedly when partners fall out. When this happens, it can be extremely stressful; below are a few solutions available.
- Buyout One partner buys the other’s shares.
- Division of Assets The company transfers assets to two new companies, each owned by one partner.
- Dissolution If no agreement is possible, the company may be wound up and assets divided.
Having a shareholders agreement or partnership agreement helps. It may set rules for buyouts or exit terms. Without such contracts, disputes can become costly. Mediation or legal advice is often needed.
Case Study: Protecting Property
A family business owned both a trading company and a warehouse. The directors feared that if the trading side failed, the warehouse would be at risk.
IBISS & CO advised creating a holding company. The warehouse was transferred into a new subsidiary owned by the holding company. A trading company was then used to rent out the warehouse while remaining under family control and ensuring its assets remained untaxed by HMRC. Their approval confirmed it as tax neutral.
How IBISS & CO Can Assist
Tax and business restructuring is our area of expertise, where our combined accounting knowledge with legal insight make for unparalleled solutions. Our team can assess whether splitting is suitable for you and advise on available tax reliefs to apply to HMRC. Afterward, they draft legal documents along with solicitors as necessary and more.
Let our experts assist with valuation, agreements and filings so the process runs as efficiently and in compliance as possible.
Contact IBISS & CO. today to setup for a complimentary 15 minute consultation on how we can divide up your property or business group.
FAQs
What is a demerger?
A demerger is when a company divides its activities or assets into two or more separate companies.
Can I move property out of my trading company tax-free?
Sometimes. Reliefs exist, but strict rules apply. Always searching for recommendations first.
Will SDLT apply if I transfer property to another company?
In most cases, yes. Group relief may apply if certain conditions are met.
How do you split a business after a partner fallout?
Options include buyouts, asset division, or dissolution. Mediation helps avoid court.
Is splitting a company always expensive?
Not always. Costs depend on complexity. Planning can reduce tax and legal fees.
How long does a split take?
Simple cases may take a few months. Complex ones may take longer due to HMRC clearance and legal steps.
Do I need HMRC clearance?
For many demergers, yes. Clearance avoids tax disputes later.
Final Thoughts
Splitting a business or property group is a big step. Done well. It protects assets, supports growth and reduces conflict. Done poorly, it creates risk, cost and stress.
With the right advice, you can achieve a smooth, tax efficient split. At IBISS & CO, we help owners plan, structure and complete splits that meet both business and family goals.
