Corporation Tax

SSE and the trading requirement

Produced by Tolley
  • 19 Oct 2021 23:04

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

  • SSE and the trading requirement
  • SSE ― the trading condition
  • What is a trading company?
  • SSE ― substantial income of a non-trading nature
  • SSE ― during the course of a trade and investments
  • SSE ― change of trading activities
  • SSE and the trading requirement ― further considerations

SSE and the trading requirement

SSE ― the trading condition

The commentary set out in this guidance note covers the current substantial shareholding exemption (SSE) regime. For further details of the regime, see Simon’s Taxes Division D1.10 and for details of the regime as it applied before 1 April 2017, please see Simon’s Taxes D1.1071.

What is a trading company?

One of the conditions that must be satisfied by the investee company for the purposes of the SSE is that it must be trading company or the holding company of a trading group or a trading sub-group. A holding company means the principal company of the group or, in the case of a subgroup, the entity that would be the principal company of that subgroup except that it is itself a subsidiary of another company. This means that a non-trading member (which is not itself a holding company) of a trading group would not qualify.

The trading conditions must also be met in certain circumstances by the investee company immediately after the disposal.

The other main conditions are set out in the Cases in which SSE applies guidance note.

The SSE legislation defines ‘trade’ as a trade, profession or vocation within the meaning of the Income Tax Acts, which must be conducted on a commercial basis with the intention of realising profits.

A particular definition also applies to the terms ‘trading company’, ‘trading group’ and ‘trading sub-group’ (see TCGA 1992, Sch 7AC, Part 3, paras 20, 21 and 22 respectively). In each case, the activities of the company, group or sub-group must not include substantial amounts of non-trading activities, such as the passive holding of investments.

SSE ― substantial income of a non-trading nature

‘Substantial’ is generally interpreted by HMRC to be more than 20%.

CG53116 provides further clarification on its interpretation of the meaning of substantial as:

  1. over 20% of turnover made up of investment income

  2. over 20% of the asset base made up of non-trading assets

  3. over 20% of the

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information


Popular Articles

Calculating QIPs

This note provides details on how to calculate quarterly instalment payments (QIPs) for large and very large companies.The instalment amounts are based on the estimated corporation tax liability of the company’s current accounting period. Therefore, this means that large and very large companies

29 Oct 2021 09:01 | Produced by Tolley Read more Read more

Substantial shareholding exemption: overview

The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are

19 Oct 2021 22:56 | Produced by Tolley Read more Read more

Class 1 v Class 1A

Class 1 and Class 1AClass 1 and Class 1A are the categories of NIC that can be charged on expenses reimbursed and benefits provided to employees. These classes are mutually exclusive. A benefit cannot be subject to both Class 1 and Class 1A NIC. Three requirements must be met before Class 1A NIC is

19 Oct 2021 23:29 | Produced by Tolley in association with Vince Ashall Read more Read more