1. Introduction: The Importance of Corporate Restructuring
Corporate restructuring is a key strategic tool for UK businesses seeking operational efficiency, tax optimisation, and long-term competitiveness. In 2025, companies are reassessing their structures to streamline operations, support acquisitions, plan succession, and adapt to regulatory changes.
Groups typically undertake corporate restructuring to:
- Simplify operations by removing redundant entities.
- Optimise tax efficiency using losses, allowances, and group relief.
- Position for mergers, acquisitions, or divestments.
- Ensure continuity in succession and governance.
- Maintain compliance with evolving legislation and accounting standards.
A well-planned corporate restructuring balances commercial objectives with legal, tax, and governance requirements, avoiding potential HMRC challenges or shareholder disputes.
2. Core Strategies in Corporate Restructuring
Mergers and Acquisitions (M&A):
M&A remains a dynamic form of corporate restructuring, offering scale, diversification, and market access. Legal, tax, and stamp duty implications must be carefully considered, particularly in cross-border deals.
Demergers and Spin-Offs:
Corporate restructuring via demerger can unlock shareholder value by separating distinct business units. HMRC allows certain reorganisations to proceed tax-neutral, provided the commercial purpose is clear and no disguised distribution arises.
Intra-Group Reorganisations:
Transferring subsidiaries or introducing holding companies can simplify governance and facilitate investment. HMRC guidance generally allows “no gain/no loss” treatment for intra-group transfers, with clawback if the relationship ends within three years.
3. Legal Framework and HMRC Guidance on Corporate Restructuring
UK corporate restructuring plans under Part 26A of the Companies Act 2006 enable companies to bind creditors and shareholders with court approval.
Recent case law — Re Houst Ltd (2022), Great Annual Savings Group (2024), and Petrofac (2025) — clarifies when cross-class cram-downs are permitted, balancing fairness with commercial necessity.
Updated HMRC guidance (March 2025) emphasises:
- A bona fide commercial purpose for the corporate restructuring.
- Maintenance of group continuity and control.
- Compliance with the General Anti-Abuse Rule (GAAR).
Early engagement with HMRC remains critical, particularly for cross-border corporate restructuring with material tax implications.
4. Tax and Governance Considerations
Corporate restructuring affects tax and governance at multiple levels:
Key group tax considerations include:
- Capital gains deferral: Intra-group asset transfers between 75% subsidiaries may proceed on a “no gain/no loss” basis.
- Stamp Duty and SDLT: Group relief applies, but clawback arises if the relationship breaks within three years.
- Loss utilisation: Group reorganisations may restrict the offset of carried-forward losses, requiring prior-year forecasts.
- VAT groups: Restructuring may affect eligibility for group registration or input tax recovery.
Governance and Creditor Protection:
Directors must observe fiduciary duties under the Companies Act 2006 and avoid prejudicing creditors. Court-approved corporate restructuring plans require full disclosure to prevent legal challenges.
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5. Shareholder Implications and Individual Tax
Share-for-Share Exchanges and HMRC Clearance:
Where a restructuring involves an exchange of shares, HMRC clearance under section 138 of the Taxation of Chargeable Gains Act 1992 allows a “no gain/no loss” rollover, deferring capital gains until the ultimate disposal of the new shares.
Business Asset Disposal Relief (BADR):
As of 2025/26, entrepreneurs’ relief (BADR) continues to provide a 10% capital gains tax rate on lifetime gains up to £1 million. Eligibility requires that the shareholder:
- Holds at least 5% of ordinary share capital and voting rights;
- Has been an employee or officer for at least two years prior to disposal;
- The company qualifies as a trading company or holding company of a trading group.
The upcoming Finance Act 2026 is expected to refine BADR, tightening relief for multi-tiered holding structures but expanding it for family succession transfers, reinforcing the link between succession planning and long-term ownership stability.
6. Cross-Border Corporate Restructuring and Litigation Risk
As global operations expand, cross-border restructuring plays an increasing role in UK corporate strategy.
UK courts have accepted jurisdiction over overseas companies with a “sufficient connection” under Part 26A, enabling them to propose a UK restructuring plan even where creditors are abroad.
Landlords and dissenting creditors are key stakeholders. Courts scrutinise fairness and commercial justification, as highlighted in recent judgments. Proper governance, documentation, and valuations are critical to minimise litigation risk during corporate restructuring.
7. Future Outlook for Corporate Restructuring
The UK government’s Spring Budget 2025 reaffirmed its commitment to maintaining competitiveness while curbing perceived abuses in corporate restructuring.
From April 2026, key expected developments include:
- Revised group relief tests for complex multi-jurisdictional structures.
- Enhanced reporting obligations for cross-border restructuring involving intangible assets.
- A potential increase in the capital gains inclusion rate for non-resident shareholders.
These measures underline the importance of proactive compliance and strategic tax planning in all future UK restructuring plans.
8. Conclusion
Corporate restructuring is more than a legal exercise — it is a strategic, tax, and governance initiative. Whether through group reorganisation, shareholder restructuring, or cross-border plans, companies should align all steps with commercial rationale, HMRC guidance, and judicial expectations.
Early engagement with advisers and HMRC ensures corporate restructuring delivers efficiency, compliance, and long-term value.