Readers’ forum: Substantial shareholding exemption on company sale

A small client company with a turnover of £400 000 (Tradeco) was sold last year to a larger unconnected purchaser.

Before the sale Tradeco was moved into a newly-incorporated Topco via a share-for-share exchange. This reorganisation took place only seven months before the sale completed. Topco sold the shares in Tradeco for consideration in cash paid in full on completion so the substantial shareholding exemption (SSE) was not available to the parent company. As a result it now has a significant corporation tax liability.

The director was advised by us that SSE would not be available and there would be a corporation tax charge in Topco but he decided he still wanted to go ahead with the deal for personal reasons. He has now asked us to see if there is a way to mitigate the tax charge.

As a further piece of...