The substantial shareholding exemption exempts the disposal of certain shares in subsidiaries from corporation tax on any capital gain. Most practitioners will be aware of the generous entrepreneur's relief available for individuals and trusts for capital gains tax purposes and that this is not available for companies.

Why does substantial shareholding exemption exist?

The purpose of this subsidiary exemption is to allow the SSE to be available where a target has ceased trading prior to the disposal of its shares. The exemption would apply to any form of disposal but in practice is often claimed in relation to the liquidation of a company.

Does substantial shareholding exemption apply to individuals?

The company can be exempt from corporation tax on the gain. The substantial shareholding exemption was introduced in the 2002 UK Finance Act. It can also apply to pre-transaction structuring. However, this exemption only applies to companies selling shares, not partnerships or individuals.

How do you qualify for SSE?

Shareholdings by other group companies can be aggregated, so that a company selling, say, a 5% shareholding of another company will qualify for the SSE if other companies in the same group as the seller own at least another 5%.

What is substantial share?

A substantial shareholding means a shareholding in respect of which the following conditions are met: The disposing company holds at least 10% of the ordinary share capital of the other company; The disposing company is entitled to at least 10% of profits available for distribution; and.

How to move shares without paying tax!!

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What can substantial shareholder do?

Substantial Shareholder means a shareholder entitled to exercise or control the exercise of fifteen percent or more of the voting power at general meetings of the company or one who is in a position to control the composition of a majority of the board of directors of a company or such lesser percentage as may be ...

What is substantial shareholder mean?

According to Section 136 of the Companies Act 2016, a substantial shareholder is defined as: A person who has an interest in one or more voting shares in a company and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company; or.

What is investor relief?

Investors' Relief reduces the amount of Capital Gains Tax on a disposal of shares in a trading company that is not listed on a stock exchange. ... It is not usually available if you or someone connected with you is an employee of the company.

What is a trading company for SSE?

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.

What are qualifying institutional investors?

Qualifying institutional investors

The first category is investors that are exempt from tax on gains or are immune from taxation as a result of their status i.e. pension funds, charities and persons immune from UK tax on their gains by reason of sovereign immunity.

Is entrepreneurs relief still available?

You can claim up to £1 million of entrepreneurs' relief in your lifetime. You can claim as many times as you like, provided your claims are within this £1 million limit. This makes ER one of the most attractive tax benefits available to entrepreneurs.

On what amount do you pay capital gains tax?

Deduct your tax-free allowance from your total taxable gains. Add this amount to your taxable income. If this amount is within the basic Income Tax band you'll pay 10% on your gains (or 18% on residential property). You'll pay 20% (or 28% on residential property) on any amount above the basic tax rate.

What is the current corporation tax rate in the UK?

The normal rate of corporation tax is 19% for the year beginning 1 April 2021. Where the taxable profits can be attributed to the exploitation of patents, a lower effective rate of tax applies. The rate is 10%.

Does SSE apply to overseas companies?

35200 Substantial shareholding exemption (SSE): overview

The rules apply equally whether the shares being disposed of are in a UK or overseas company. ... Any gain on the disposal of the shares is not chargeable to tax and any loss is not available to set against other gains.

What is a Degrouping charge?

Related Content. A degrouping tax charge is triggered where a company acquires certain assets from a group company on a no gain/no loss basis and the acquiring company leaves the group within six years of the transfer while it holds the relevant asset.

Does SSE apply to preference shares?

There is no minimum period for which the preference shares must be held—a minimum holding period applies, but only to the shares that make up the substantial shareholding. The SSE does not apply to a no gain, no loss disposal such as an intra-group capital asset transfer.

What is QII Exemption?

» Qualified Interest Income (QII) Percentages for certain Invesco Closed End Funds. Certain Invesco Closed End Funds generate qualified interest income that may be exempt from United States withholding tax when distributed to non-resident alien individuals and foreign corporations.

What is a share for share exchange?

A share for share exchange is where one or more shareholders exchange shares they hold in one company for shares in another company. A common example of this is where a new holding company is put on top of an existing group. Shareholders give their shares in the old TopCo to NewCo in exchange for shares in NewCo.

When did SSE rules change?

The UK's substantial shareholdings exemption ('SSE') applies, in certain circumstances, to exempt gains arising on the disposal of shares by corporate shareholders. In Finance Act 2017 the SSE legislation was reformed and these changes apply to disposals on or after 1 April 2017.

What is the difference between entrepreneurs relief and investors relief?

Entrepreneurs' relief applies to shares no matter how they were acquired and whether or not they are fully paid up. ... Investors' relief requires that the company is a trading company (or holding company of a trading group) throughout the ownership period of the shares.

Is investors relief the same as entrepreneurs relief?

All UK angel investors, venture capitalists and wealthy private individuals may be eligible to claim investors' relief. ... Unlike entrepreneurs' relief which requires a 5% minimum shareholding in the company, there is no minimum percentage shareholding required to qualify as an investor.

What qualifies BPR?

To receive BPR, you must have owned the business or business assets for at least two years before your death. So, if you pass away shortly after acquiring the asset, your estate won't be eligible for the relief. The exception here is if you inherit the asset from your spouse, who also owned it for less than two years.

What is substantial shareholder Singapore?

According to the Companies Act Cap 50, a “substantial shareholder” is defined as a person that has a stake in one or more voting shares in the company or in one of the classes (when the share capital of the company is divided into 2 or more classes of shares), where the total votes attached to that share, or those ...

What is major shareholder?

A majority shareholder is a person or entity that owns and controls more than 50% of a company's outstanding shares. As a majority shareholder, a person or operating entity has a significant amount of influence over the company, especially if their shares are voting shares.

What is a significant shareholder?

Significant Shareholder means an individual who has an ownership interest in the voting securities of an entity, or who is a director, partner, officer, employee or agent of an entity that has an ownership interest in the voting securities of another entity, which voting securities in either case carry more than 10% of ...