Substantial shareholdings exemption
Substantial shareholdings exemption

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Substantial shareholdings exemption
  • Summary of conditions
  • Scope of the exemption
  • The substantial shareholding requirement
  • The trading status test
  • Meaning of trading company
  • Meaning of trading group and trading subgroup
  • Effect of shareholdings on trading status
  • Loss of trading status—the two-year look back
  • Qualifying institutional investors
  • more

The substantial shareholdings exemption (SSE) is an exemption from corporation tax on chargeable gains for certain share disposals by companies. The exemption does not apply to individuals or to other non-corporates. The SSE is intended to make it easier for companies to restructure, and to make the UK more competitive when compared with the 'participation exemption' regimes that exist in some other European countries.

Following the general rule that a disposal of an exempt asset cannot give rise to an allowable loss (for more details, see Practice Note: Capital losses), a loss on a disposal of a shareholding that qualifies for the SSE will not be an allowable loss for capital gains purposes.

The exemption applies automatically, without the need to make a claim, nor is it possible to opt out of the rules where it would be advantageous to claim a loss.

This Practice Note describes the scope of the SSE, the conditions that must be met, and the special rules applying to institutional investors, groups of companies, share exchanges and reconstructions.

Summary of conditions

A company (the investing company) that disposes of a holding in another company (the target company) may qualify for the SSE. The conditions that must be met before the SSE will apply depend on whether the target company is ultimately owned by institutional investors. The position relating