Cases in which SSE applies

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Cases in which SSE applies
  • The main exemption
  • Aggregation of share ownership to meet the SSE conditions
  • The first subsidiary exemption ― assets related to shares
  • The second subsidiary exemption ― conditions for the main exemption have previously been met
  • The third subsidiary exemption ― institutional investors
  • Cases in which SSE does not apply

This document discusses these rules in detail, together with the conditions that need to be satisfied by the investing company and the investee company. It also covers the detail on the joint venture companies; and the qualifying institutional investors.


The main exemption

The substantial shareholding exemption (SSE) applies to disposals of shares and interests in shares by qualifying companies on or after 1 April 2002 and exempts gains from corporation tax in certain circumstances. Conversely if losses are generated by the disposal and the SSE conditions are met, they are not allowable.

The commentary set out in this guidance note is based on both the legislation for disposals on or after 1 April 2017. For details of the regime as it applied before this date, see Simon’s Taxes D1.1071 (subscription sensitive).

TCGA 1992, Sch 7AC

The investee company and the shareholding itself must satisfy certain requirements in order for the investing company to benefit from the exemption, as set out in the Overview of the substantial shareholding exemption guidance note; however, the key conditions are summarised below:

  • an investing company disposes of a shareholding in an investee company
  • at the time of the disposal, the investing company has owned at least 10% of the ordinary shares of the investee company (alternatively, qualifying institutional investors have owned at least 25% of the ordinary share capital of the investee company with an acquisition cost of at least £20m (see below)) for a continuous period of 12 months during the previous six years
  • from the beginning of the latest period of 12 months for which the substantial shareholding condition is met until the time of the disposal, the investee company must have been a trading company or the holding company of a trading group or sub-group

The investing company must also be entitled to:

  • at least 10% (or a proportionate percentage) of

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