D1.1043 Substantial shareholding exemption—The third subsidiary exemption: qualifying institutional investors
The third subsidiary exemption applies to disposals on or after 1 April 20171 where a substantial shareholding is held.
It provides an exemption which applies when the target company does not meet the trading condition (see D1.1031) but at least part of the investing company's ordinary share capital is held by qualifying institutional investors and the investing company is not a disqualified listed company. It may apply to exempt a gain or disallow a loss in whole or in part, depending on the proportionate interest held by the qualifying institutional investors.
Where 80% or more of the ordinary share capital in the investing company is held by qualifying institutional investors then the entire gain (or loss) will be exempt (or disallowed)2.
Where at least 25% but less than 80% of the ordinary share capital in the investing company is so held then part of the gain (or loss) equal to the percentage of the ordinary share capital of the investing company which is owned by the qualifying institutional investors is exempt (or disallowed)3.
Details of how the percentage owned by qualifying institutional investors for these purposes is calculated is considered in more detail below.
The exemption does not apply where the anti-avoidance4 or other excluding provisions5 apply, see D1.1050, even though, unlike the main exemption and the first and second subsidiary exemptions, they are not specifically referred to in the exemption itself.