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This guidance note deals with the tax consequences for shareholders and companies involved in either a type 2 or type 3 (indirect) statutory demerger. For an introduction to statutory demergers, including an overview and diagrams of the three permitted types of demerger, conditions for a statutory demerger, chargeable payments and clearances and reporting, see the Statutory demergers ― overview guidance note.

For overall guidance on demergers, including choice of the most appropriate route and planning the demerger project, see the Demergers ― overview guidance note.

Statutory demergers are sometimes referred to as exempt demergers.

Unlike direct demergers, an indirect statutory demerger can involve a distribution of assets (as opposed to, or in addition to, shares) and still qualify as an exempt distribution.

Note that prior to the demerger it may be necessary, or desirable, to carry out a hive-down (ie an intra-group transfer of assets to the demerged company).