How does SSE interact with other legislation?

By Tolley

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

  • How does SSE interact with other legislation?
  • SSE and the de-grouping charge
  • Holdover relief
  • Shares appropriated to trading stock
  • Intra-group transfers
  • Intra-group share exchanges
  • Negligible value claims
  • Override of provisions deeming there to be no disposal
  • Transfer of assets to a non-resident company
  • Liquidation

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 (both subscription sensitive).

SSE and the de-grouping 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 ofan 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 ofthe company leaving the group. Instead, the gain is added to the sales proceeds received by the company selling the shares. For the purposes ofSSE, the deemed transaction is treated as taking place immediately before the company leaves the group (rather than at the time ofthe 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 Overview ofthe substantial shareholding exemption guidance note. If a loss is generated on the disposal, it will be deducted from the consideration received by the investing company on disposal ofthe 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 ofthe shares at the time ofthe degrouping event. In effect, the company leaving the

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