Corporation Tax

How does SSE interact with other legislation?

Produced by Tolley
  • 19 Oct 2021 23:02

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

  • How does SSE interact with other legislation?
  • SSE and the degrouping charge
  • SSE available for de-grouping charges
  • Transfers of trade protected from exclusion from the SSE
  • SSE and holdover relief
  • SSE on shares appropriated to trading stock
  • SSE and intra-group transfers
  • SSE and intra-group share exchanges
  • SSE and negligible value claims
  • Override of provisions deeming there to be no disposal
  • More...

How does SSE interact with other legislation?

The commentary set out in this guidance note is based on the current substantial shareholdings exemption (SSE) regime. For more in depth commentary on these provisions, see Simon’s Taxes D1.1045, D1.1061.

SSE and the degrouping charge

SSE available for de-grouping charges

Assets on which capital gains arise are transferred between group companies on a no gain / no loss basis. However, if a company leaves the group within six years of an intra-group transfer, whilst still owning the transferred asset, a ‘degrouping’ or ‘exit’ charge will arise (see the Degrouping charges guidance note). Similar degrouping rules apply for assets within the intangible regime which are transferred intra-group on a tax neutral basis (see the Degrouping charges and elections ― IFAs guidance note).

For assets on which capital gains arise, a de-grouping charge does not arise in the hands of the company leaving the group. Instead, the gain is added to the sales proceeds received by the company selling the shares. For the purposes of SSE, the deemed transaction is treated as taking place immediately before the company leaves the group (rather than at the time of the intra-group transfer as is usually the case). Consequently, the de-grouping charge may be exempt provided that the relevant SSE conditions are satisfied. For full commentary on the key conditions, see the Substantial shareholding exemption ― overview guidance note. If a loss is generated on the disposal, it will be deducted from the consideration received by the investing company on disposal of the shares in the company leaving the group. The SSE rules effectively override the de-grouping charge provisions. Furthermore, the base cost in the shares that are subject to the degrouping charge is uplifted (or reduced) to the market value of the shares at the time of the degrouping event. In effect, the company leaving the group is put in the same position, in terms of its carried-forward base cost, as if it had acquired

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