Early last year the HM Treasury published its consultation on the potential reform of the Substantial Shareholdings Exemption (SSE). This exempts the disposal of certain types of shares in subsidiaries from corporation tax or capital gains.
The reform was considered to increase the UK’s competitiveness and the consultation sought to demonstration of economic benefits that may occur from changes to the regime.
Previously the exemption was only available on the disposal of shareholdings of at least 10% as long as they have been owned for at least a year and both the company in which the shares are being disposed of and too must have been trading prior to and for the period immediately after the disposal. Non-trading entities were eligible as long as they are not considered ‘substantial’. It was criticized that the exemption was too complex and limiting.
The consultation put forward a number of options including a more comprehensive exemption, the removal or simplification of the tests for investors and/or investees and reducing the shareholding requirement. The main objective of the consultation was to identify examples where the SSE has not been available and how these compares with equivalent overseas exemptions.
The result is that the substantial shareholdings exemption is now more widely available to corporate groups.