Commentary

D1.1041 Substantial shareholding exemption—The first subsidiary exemption: assets related to shares

Corporate tax
Corporate tax | Commentary

D1.1041 Substantial shareholding exemption—The first subsidiary exemption: assets related to shares

Corporate tax | Commentary

D1.1041 Substantial shareholding exemption—The first subsidiary exemption: assets related to shares

The first subsidiary exemption applies1 to exempt a gain where the investing company realises a gain from the disposal of an asset related to shares. Where the assets of a company in liquidation are vested in the liquidator under the Insolvency Act 1986, s 145 or the Insolvency Act (Northern Ireland) Order, SI 1989/2405 art 123, para 2 applies as if the assets were those of the companies, and transfers to and from the company are disregarded2 (see also D1.1021). In broad terms, an asset related to shares3 is an option over shares or securities (or an interest in them — see D1.1065 for the definition of this), or a security with rights to convert into or acquire shares (or an interest in shares), or an option over such a security. The definition is considered in more detail below. The exemption does not apply4 where the anti-avoidance or other excluding provisions in TCGA 1992, Sch 7AC, Pt 1, paras 5, 6 apply, see D1.1050.

For the first subsidiary exemption to apply one of the following conditions must be met5. Either:

  1.  

    •     immediately before the disposal of the asset related to shares the investing company holds shares or an interest in shares in the target company, and those shares, if sold at the same time, would qualify for the main exemption6, or

  2.  

    •     where the investing company disposes of an asset related to shares in the target company, but does not

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