Substantial shareholdings exemption

The substantial shareholdings exemption is an exemption from assessment of capital gains under corporation tax applicable to United Kingdom companies. The exemption is found in Schedule 7AC of the Taxation of Chargeable Gains Act 1992.

The rationale for the exemption is that groups of companies should be able to restructure without having to concern themselves with taxation of capital gains.

Other European jurisdictions apply a more comprehensive system. For example, in Luxembourg and the Netherlands as well as in Germany and Belgium, both capital gains derived from, as well as dividend income earned on, qualifying shares are (mostly) exempt from further local taxation. These comprehensive systems are generally referred to as participation exemption systems.

Eligibility

To qualify for the exemption, a disposal must meet all of the following criteria:

The last two conditions must be met:

Applicability

The exemption only applies to disposals of shares made on or after 1 April 2002.[10] The relief is automatic, meaning that a company does not have to submit a claim to Her Majesty's Revenue and Customs.

See also

References

  1. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 1(1)
  2. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 7
  3. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 8(1)(a)
  4. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 8(1)(b)
  5. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 8(1)(c)
  6. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 18
  7. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 19
  8. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 18(1)(a) and para 19(1)(a)
  9. Taxation of Chargeable Gains Act 1992, Schedule 7AC, para 18(1)(b) and para 19(1)(b)
  10. Finance Act 2002, section 44(3)
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