Autumn Statement 2016: Substantial Shareholding Exemption (SSE) reform

Where Company A (investing company) holds a substantial shareholding (10% or more) in Company B for a continuous 12-month period in the two years prior to the disposal, any gain on the sale of shares of Company B may qualify for exemption under SSE. As part of the conditions, the investing company is required to be a trading company or, if part of a group, a member of a trading group throughout the qualifying period. It must also be a trading company or a member of a trading group immediately after the disposal.

The Government have been reviewing options, via a consultation process, to simplify SSE and reform the exemption to make the UK more attractive as a holding company location for groups with substantial investment activities.

The Autumn Statement has confirmed that the Government will now make changes, effective from April 2017, to simplify the rules by removing the investing company requirement within SSE. At the same time a more comprehensive exemption for companies owned by qualifying institutional investors will be introduced. Further details are awaited.

If the changes remove the need for the holding company to be a trading company or member of a trading group immediately before and after the sale of shares, this will increase the scope of the exemption so that it may apply in many more situations, which would be welcomed.