Substantial shareholdings exemption

16 March 2016 

The government are consulting on the future of the substantial shareholding exemption.

The substantial shareholding exemption (SSE) was introduced in 2002 and was designed to ensure that tax does not act as a disincentive to commercially driven business transactions. Many other countries had an equivalent relief and the government at the time feared foreign investment in the UK would be put at risk in the absence of such an exemption.

Sixteen years later the international tax landscape has changed completely and it is not surprising that the government has decided to review the operation of the relief, which is arguably very generous in its operation. We don’t object to the review but would be very concerned if SSE were to disappear completely. It still fulfils a valuable function in the tax system. Without SSE there is a risk that companies would look for avoidance opportunities to remove the tax charge on disposals of subsidiaries. That would be a backward step.

If you would like to discuss how these announcements might affect you, please contact Melanie Reed or your usual RSM contact.