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SSE changes hailed as ‘positive step’

15th Dec 2016
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Financial graph of shareholdings

Changes to the substantial shareholding exemption as part of the draft Finance Bill 2017 legislation have been welcomed as a positive step by tax experts.

Investment companies will now be able to benefit from the SSE, and companies at least 25% owned by ‘qualifying institutional investors’ will be eligible for exemption on the disposal of any substantial shareholding, irrespective of whether the underlying company is trading.

The changes represent a simplification of the existing SSE rules, and an expansion to the scope of the UK's participation exemption for chargeable gains.


The SSE may apply when a trading company disposes of shares (or interest in shares) it holds in another trading company.  This disposal would normally trigger  a capital gain, but if the SSE  conditions are met there is no taxable gain (but also no qualifying taxable loss).

The exemption was introduced in 2002, and according to taxation expert Pete Miller from The Miller Partnership the official reasoning behind it was to make UK PLC a better place to do business. It allows companies to hive off non-core trading businesses without incurring a large tax bill, and reinvest in their core business.  The theory is that the purchaser takes on this non-core business, which becomes a core activity for them, and improves that business.

Another side to the SSE’s introduction was the fact that corporation tax on gains for bought and sold companies was considered optional in the tax environment of the early 2000s, and most companies could usually plan their way out of them.


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