Substantial Shareholdings Exemption

The UK government has provided an exemption from tax for trading companies that sell other trading companies for 15 years.  The Finance Bill 2017 will remove certain restrictions which have caused practical problems with claiming this exemption from the budget date to simplify the regime, these include:

1. The removal of the requirement that the company sold continues to be a trading company after the sale;
2. The removal of the requirement that the company making the disposal must be a trading company or part of a trading group;
3. An extension to the period in which 10% of the shares in the sold company must have been held for at least 1 year from any point within the 2 years prior to the sale, to any point in the 6 years prior to the sale.

The combined effect of the changes will be to make it easier for groups with a mixture of trading and investment activities to claim the exemption on disposals of trading companies, and remove the need to rapidly liquidate a holding company after it disposes of its last trading subsidiary.

The exemption applies to both gains and losses, so the changes will restrict the ability of certain companies to claim a capital loss on disposals following the 2017 budget.