UK and International Tax news

Reform Of The Substantial Shareholdings Exemption

Thursday 9th June 2016

Further to the announcement made in the March 2016 Budget, HMRC has issued a consultation document on the reform of the Substantial Shareholdings Exemption [SSE] which provides an exemption from corporation tax for capital gains and losses realised on the disposal of certain qualifying shareholdings.

The government believes that the SSE is generally realising its policy objective of ensuring that the tax treatment of share disposal gains does not discourage trading groups from restructuring or making productive disposals.

However, it recognises that there have been fundamental changes to the domestic and international tax landscapes since the SSE was first introduced, changes which raise questions around the relevance of its original policy intention and the impact it is having on the UK’s competitiveness as a holding company location. It is also aware of concerns regarding the SSE’s complexity and the potential for its application to be uncertain or contingent on factors outside of a company’s control.

For these reasons the government is now consulting on reforms to make it simpler, more coherent and more internationally competitive.

The consultation sets out a number of options for possible reform of the SSE, ranging from technical changes to the existing legislation to a more comprehensive exemption for gains on substantial share disposals that corresponds with participation exemption regimes in place in some other EU countries.

The consultation considers the impact of these reforms and the potential benefits for the UK economy. It also considers the potential risks associated with reform and how these could be adequately protected against.

The consultation will run until 18 August 2016. This will allow the government to consider the merits of reform ahead of the Autumn Statement and possible legislation in the 2017 Finance Bill.

If you would like more information on the condoc, please contact Keith Rushen on 0207 486 2378.

Contact Us