Chapter 14 Substantial Shareholding Exemption

Question 1

14.2 Outline of the relief

Answer 1

Where a company disposes of hares in a trading company (the investee company) out of a substantial shareholding:
• any gain arising is exempt
• a capital loss is not allowable

Question 2

14.3 Substantial shareholding requirement

Answer 2

The investing company needs to of held at least 10% of the ordinary share capital of the investee company throughout a 12-month period beginning no more than six years prior to disposal. They must also have 10% of the profits available for distribution and the assets available for distribution on a winding up of the investee company.

Question 3

14.4 Conditions

Answer 3

The investee company must have been a trading company or holding company of a trading group throughout the period beginning with the start of the latest 12-month period in relation to which the investing company passed the substantial shareholding test and ending with the time of the disposal.

Question 4

14.5 Group Shareholding

Answer 4

A group’s shareholding in the investee company is aggregated in order to determine whether the substantial shareholding requirement is satisfied. Group companies are 51% subsidiaries.

Question 5

14.6 Investments in Non-UK resident companies

Answer 5

Gains and losses arising on the sale of non-UK resident companies are also covered by the exemption.