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There are three subsidiary exemptions in addition to the main SSE. The first subsidiary exemption is discussed in D1.1041, the second subsidiary exemption is discussed below and the third in D1.1043.

The second subsidiary exemption applies where the investing company meets the substantial shareholding requirement (see D1.1010), but the conditions for the company invested in are not satisfied at the time of disposal of shares, an interest in shares or on assets related to shares, but would have been satisfied for the main exemption (see D1.1007) if the disposal had taken place up to two years previously¹.

The purpose of the exemption is to ensure that certain gains not qualifying for the main exemption are nevertheless exempt, while certain losses which might otherwise be allowable are not (however, see below regarding allowable losses)².

The gains covered by the second subsidiary exemption are those arising on shares, interests in shares and assets related to shares (see D1.1041 for the meaning of this). The exemption applies where the following