Commentary

D1.1042 Substantial shareholding exemption—The second subsidiary exemption: main exemption conditions previously met

Corporate tax
Corporate tax | Commentary

D1.1042 Substantial shareholding exemption—The second subsidiary exemption: main exemption conditions previously met

Corporate tax | Commentary

D1.1042 Substantial shareholding exemption—The second subsidiary exemption: main exemption conditions previously met

The second subsidiary exemption applies where the investing company meets the substantial shareholding requirement (see D1.1010) but the conditions for the substantial shareholding exemption (SSE) are not satisfied at the time of disposal of shares, an interest in shares or on assets related to shares, but would have been satisfied for the main exemption (see D1.1007) if the disposal had taken place up to two years previously1.

The purpose of the exemption is to ensure that certain gains not qualifying for the main exemption are nevertheless exempt, while certain losses which might otherwise be allowable are not (however, see below regarding allowable losses)2.

The gains covered by the second subsidiary exemption are those arising on shares, interests in shares (see D1.1065 for the definition of this) and assets related to shares (see D1.1041 for the meaning of this). The exemption applies where the following conditions are satisfied3:

  1.  

    •     at the time of the disposal the investing company meets the substantial shareholding requirement (ie it has held a substantial shareholding in the target company for the required continuous 12-month period in the six years (or two years for disposals before 1 April 2017) before the disposal, see D1.1010)

  2.  

    •     a chargeable gain or allowable loss would otherwise result from the disposal (ie the disposal is not otherwise within SSE)

  3.  

    •     at the time of the disposal the investing company is within the scope of corporation tax on chargeable gains either by

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