Advice on substantial shareholdings exemption

KEY POINTS

• The substantial shareholding must now be owned for at least 12 months in the past six years.
• Two main conditions must be satisfied: the ‘substantial shareholding’ requirement and the ‘investee company’ trading test.
• The ‘seller’ must hold at least 10% of the ordinary share capital in the investee company.
• The investee company must qualify from the start of the 12-month 10% ‘substantial shareholding’ period.
• The legislation does not define ‘substantial’ but HMRC normally applies a 20% benchmark.

Since its inception in 2002 the substantial shareholdings exemption (SSE) has provided a valuable corporate capital gains relief for the sale of trading subsidiaries and ‘associated companies’.

As a brief recap for those unfamiliar with this relief SSE enables a gain on a qualifying disposal of shares to be...