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Overview of the substantial shareholding exemption

D1.1001 Substantial shareholding exemption—overview

The purpose of the substantial shareholding exemption (SSE) is to exempt gains and disallow losses realised by companies and groups on certain disposals where the investing company (or group) holds (or held) a 'substantial shareholding' (broadly, a 10% shareholding) in a trading company or trading sub-group.

The SSE legislation is contained in TCGA 1992, Sch 7AC. HMRC guidance is included in HMRC's Capital Gains Manual at CG53100 onwards.

For the exemption to apply, a company¹ must be the entity making the disposal and it is not applicable to disposals made by individuals or trusts. As regards partnerships or limited liability partnerships, a corporate partner may be eligible for the exemption in respect of its share of the disposal of a partnership asset..

For the purposes of SSE, a group² is the worldwide group (including both UK and non-UK resident subsidiaries) that includes the principal company and its 51% subsidiaries³.

A substantial shareholding