Commentary

D1.1031 Substantial shareholding exemption—The target company requirements

Corporate tax
Corporate tax | Commentary

D1.1031 Substantial shareholding exemption—The target company requirements

Corporate tax | Commentary

Substantial shareholding exemption—Requirements to be met by the target company

D1.1031 Substantial shareholding exemption—The target company requirements

Broadly, the conditions relating to the target company (the company invested in) require trading status throughout a specified period. Note that if the target company requirements are not met, it is still possible to qualify for exemption under the third (qualifying institutional investor) subsidiary exemption (see D1.1043) and if the target company has ceased trading in the last two years then the second subsidiary exemption (see D1.1042) may exempt the disposal.

The target company must be a qualifying company in order for the main substantial shareholding exemption (SSE) to apply. A qualifying company is1:

  1.  

    •     a trading company (see D1.1032)

  2.  

    •     the holding company of a trading group (see D1.1033), or

  3.  

    •     the holding company of a trading subgroup (see D1.1034)

It must be a qualifying company throughout the period which starts at the beginning of the 12-month period for which the substantial shareholding requirement (see D1.1010) is met and ends at the time of the disposal2. Note that this period can itself exceed 12 months in length. This is the case when it is not the final 12-month holding period by the investing company that gives the entitlement to SSE. An example is where the investing company has made a previous disposal that reduced its shareholding in the target company to below the substantial shareholding requirement. In that case, the period during which the target company must be a qualifying company starts at

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