Commentary

D1.1010 Substantial shareholding requirement

Corporate tax
Corporate tax | Commentary

D1.1010 Substantial shareholding requirement

Corporate tax | Commentary

Substantial shareholding exemption—The substantial shareholding requirement

D1.1010 Substantial shareholding requirement

In order to qualify for the substantial shareholding exemption (SSE), the investing company must have held a substantial shareholding in the target company throughout a continuous 12-month period (see D1.1065 for the definition of this) beginning not more than six years before the date of disposal (or two years before the date of disposal for disposals before 1 April 2017)1. Note that this holding period only applies to the qualifying substantial shareholding itself — the ownership period of any other holding of shares (eg preference shares, or ordinary shares in excess of the substantial shareholding requirement) or an interest in shares (see D1.1065 for the definition of this) can be less than 12-months.

In most cases a substantial shareholding means a holding of more than 10%2 of the ordinary share capital (see D2.108) in conjunction with a beneficial entitlement to not less than 10% of both the profits available for distribution to equity holders and the assets available for distribution to equity holders on a winding up3. (See below for details of when the existence of non-commercial loans and preference shares can cause a shareholder that holds 10% or more of the ordinary share capital in the target company to not meet the substantial shareholding requirement.)

It can also mean a holding of less than 10% for disposals on or after 1 April 2017 where4:

  1.  

    •     at least 25% of the ordinary share capital of the investing company is held by

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