Sell a trading subsidiary without corporation tax on the gain.

The substantial shareholding exemption, usually called SSE, means a company pays no corporation tax on the gain when it sells shares in another company, provided the conditions are met. It sits in Schedule 7AC TCGA 1992. For an owner-managed group, the classic case is a holding company selling a trading subsidiary: the whole gain can be exempt, and the sale proceeds stay in the holding company. SSE does not apply to individuals selling their own shares.

The holding company must have held a substantial shareholding, at least 10%, throughout a continuous 12-month period that began no more than six years before the day of the sale. In practice that means at least a year of ownership before the sale, and the 10% stake does not need to be held right up to the sale, as long as a qualifying 12 months fell within the six-year window.

Yes. SSE only needs a substantial shareholding, which means at least 10% of the subsidiary's ordinary share capital, together with at least 10% of the profits available for distribution and 10% of the assets on a winding up. A holding company with, say, a 40% stake in a trading joint venture can qualify, as long as the 12-month holding period and the trading conditions are also met.

No, not for disposals on or after 1 April 2017. Before then, the selling company also had to be a trading company or a member of a trading group. Finance (No. 2) Act 2017 removed that requirement, so a holding company with large cash balances or an investment portfolio can still sell a trading subsidiary under SSE. What matters now is the 10% holding and the trading status of the company being sold.

The company being sold must be a qualifying company, meaning a trading company or the holding company of a trading group or trading subgroup. It must meet that test throughout the period from the start of the latest qualifying 12-month holding period up to the moment of sale. A trading company is one whose activities do not include, to a substantial extent, activities other than trading, such as holding investments or letting property.

There is no fixed limit in the legislation. HMRC treats more than 20% as substantial and looks at indicators such as non-trading income, the asset base, expenses and staff time, and the company's history. Cash kept to meet the trade's needs is usually fine. HMRC's guidance warns that long-term retention of significant trading profits may amount to an investment activity, so large idle balances in the company being sold need reviewing.

It can, but there is an extra condition. Normally the subsidiary only needs to be trading up to the moment of sale. Where the buyer is connected with the selling company, for example another company controlled by the same family, the subsidiary must also be a trading company or holding company of a trading group immediately after the sale. This stops SSE being used on sales within the same ownership just before the trade stops.

No. SSE is automatic. HMRC's guidance says no claim is required: if the conditions are met, the gain is simply not a chargeable gain. That also means you cannot opt out of it when it would suit you. The corporation tax return still needs to reflect the disposal correctly, and it is sensible to keep a file showing how the 10%, 12-month and trading conditions were met.

No. Because a gain would be exempt, a loss on a disposal that meets the SSE conditions is not an allowable loss. HMRC's guidance confirms this. So if a subsidiary has fallen in value and the holding company expects to sell at a loss, SSE works against you. Where a loss is likely, the conditions should be checked before the sale, because the exemption applies automatically whenever they are met.

Usually, yes. If a subsidiary received an asset from another group company at no gain and no loss within the previous six years, leaving the group can trigger a degrouping charge under section 179 TCGA 1992. Where the subsidiary leaves because its shares are sold, section 179(3D) adds that gain to the seller's sale proceeds for the shares. If SSE applies to the share sale, the degrouping gain is exempt along with it.

Often, yes. A hive-down moves a trade or assets into a new subsidiary, which is then sold. A new company would not normally have a 12-month history, but paragraph 15A of Schedule 7AC can treat the seller as having held the shares while the assets were used in the trade elsewhere in the group. Degrouping charges on the transferred assets are generally added to the share proceeds. SDLT, VAT and employment points also need checking.

Not straight away. The holding company acquires the subsidiary's shares when it is inserted, so it normally needs to hold them for at least 12 months before the sale for SSE to apply. A holding company inserted with a sale already planned also has to pass the main purpose test that Finance Act 2026 introduced for share exchanges. Inserting the holding company well before any sale talks is far simpler.

Not when it reaches you. SSE exempts the holding company's gain, so the proceeds arrive in the company without corporation tax. When the cash is later paid to you as a dividend, it is taxed at 10.75%, 35.75% or 39.35% for 2026/27, after the £500 dividend allowance. Other routes, such as a liquidation, are taxed as capital in many cases but have their own anti-avoidance rules. The tax is deferred, not removed.

Yes. Because no corporation tax is paid on the exempt gain, the full proceeds stay in the holding company and can be used to buy or start another business, invest, or fund property. Be aware that a company mainly holding investments can become a close investment-holding company, which cannot use the small profits rate or marginal relief, so its future profits are taxed at 25%.

Usually not. SSE needs the company being sold to be a trading company or the holding company of a trading group. A subsidiary whose business is letting property is an investment company, not a trading company, so a gain on selling its shares is normally taxed at the main corporation tax rate of 25%. A subsidiary that trades from its own premises is different, because owning property it uses in its trade is part of trading.

Yes, if the subsidiary is the holding company of a trading group or trading subgroup. In that case the trading test is applied to the subgroup's activities taken together, rather than to the intermediate holding company on its own. So a holding company can sell an intermediate company that owns several trading companies under SSE, provided the subgroup as a whole does not carry on non-trading activities to a substantial extent.

Yes. For SSE, a company that is a member of a group is treated as holding any shares held by other companies in the same group. So if two subsidiaries in a group each hold 6% of a trading company, the group is treated as holding 12%, and either can sell with the benefit of the exemption, provided the 12-month and trading conditions are met for the combined holding.

They are special rules, from 1 April 2017, for companies at least 25% owned by qualifying institutional investors such as pension schemes, life assurance businesses, sovereign wealth funds and charities. A holding below 10% can count as substantial if it cost at least £20m, and the gain can be fully or partly exempt even if the company sold is not trading. They rarely apply to owner-managed groups, but can matter where an institutional investor has bought in.

No. SSE only applies to a company's disposal of shares, interests in shares and certain related assets. If the subsidiary sells its trade and assets to a buyer, any gains on those assets are taxed in the subsidiary in the normal way, and getting the cash to the holding company and then to shareholders is a separate step. That is one reason sellers usually prefer a share sale where the buyer will accept it.

There is no dedicated statutory clearance for SSE. HMRC's non-statutory clearance service is not available for tax planning or for questions of fact, and whether a company is trading is largely a question of fact. In practice, the safer approach is a documented review of the holding period and trading status before the sale, which also helps with the buyer's due diligence and the sale agreement.