Commentary

D1.1050 Substantial shareholding exemption—Exclusions from exemption

Corporate tax
Corporate tax | Commentary

D1.1050 Substantial shareholding exemption—Exclusions from exemption

Corporate tax | Commentary

Substantial shareholding exemption—Exclusions from exemption

D1.1050 Substantial shareholding exemption—Exclusions from exemption

TCGA 1992, Sch 7AC sets out certain circumstances where the substantial shareholding exemption (SSE) will not apply. The first situation is where there is an avoidance motive in certain defined situations1. The second situation is in the case of certain no gain/no loss disposals2.

Anti-avoidance for SSE

SSE does not apply in certain defined situations (see below) where the disposal is the result of arrangements which had as their sole or main benefit the realisation of an exempt gain under the legislation3. The term arrangements includes any scheme, agreement or understanding, whether or not legally enforceable4.

This anti-avoidance provision applies to such arrangements only if both of the following specific circumstances exist:

  1.  

    •     before the accrual of the gain5:

    1.  

      –     either the investing company acquired control (as defined in CTA 2010, ss 450, 4516, see D3.103) of the target company, or the same person or persons acquire control of both companies, or

    2.  

      –     there has been a significant change in the trading activities (see below) of the target company at a time when it was controlled by the investing company, or both companies were controlled by the same person or persons, and

  2.  

    •     the gain which accrues to the investing company on a disposal of shares (or an interest in shares (D1.1065), or an asset relating to shares (D1.1041)) is

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