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The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. No claim is required. Provided the conditions for SSE are met, it applies automatically. Conversely, if losses are generated by the disposal and the SSE conditions are met, the losses are not allowable.

There is no ability to disclaim the exemption (for example, where it would be advantageous to claim a loss).

The exemption is aimed at disposals by companies of investments in trading companies, groups and subgroups.

Ensuring the conditions for SSE are met is extremely important as the financial value of the exemption can be significant. Conditions are in place relating to both the investing company and the investee company. The rules are complex and, in particular, HMRC will often scrutinise the activities of the company / group / sub-group disposed of to establish whether the trading activity tests are met.

The SSE regime is contained in TCGA 1992, Sch