Even though HMRC may have given clearance for a demerger, the demerger may later be exploited for avoidance.

To counter this, the legislation introduces the concept of chargeable payments. Broadly, these are payments of any kind by a company to its members, directly or indirectly, which are money payments or the transfer of money's worth.

However, chargeable payments do not include:

distributions, or

exempt distributions, or

payments made for genuine commercial reasons.

CTA10/S1086 deals with payments made within five years of an exempt distribution by:

any of the companies involved in the demerger, or

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