The substantial shareholding exemption (SSE) is a wonderfully generous and flexible relief which allows companies to make tax free sales of shares in trading companies – typically subsidiaries, but can be any holding of 10% or more.
It used to be that the company had to be owned for a year pre-sale to qualify. The rules were relaxed a couple of years ago and now, as long as the trade has been owned for at least a year, you can transfer it into a company and sell the company that same day and be eligible for SSE.
However, you have to have had a group of companies for a year pre-sale to qualify.
Therefore if you have already got a group, you’ve got lots of flexibility.
Moreover, if you have one company with a couple of divisions and they want to sell one, you’ve got a problem – you will pay corporation tax on that sale. You would need to create a group and wait a year to qualify for the SSE relief.
Therefore, it is worth considering incorporating a dormant subsidiary as an insurance policy in case at some point in the future you may wish to sell part of your company’s trade. This will give you the ability to sell that part of the trade tax free without having to wait 12 months and possibly losing the opportunity of the sale.
We are always happy to review your capital tax position as well as annual corporation tax and income tax. For more information on eligibility for SSE as above, or Entrepreneurs’ Relief and inheritance tax Business Property Relief, please contact Claire Astley on firstname.lastname@example.org.