The Government has launched a consultation on reform of the Substantial Shareholding Exemption (SSE) which sets out a range of possible options from technical changes to replacement with a new, more comprehensive exemption.
The SSE has been in place since 2002, and although the Government believe it is generally realising its policy objectives there are concerns regarding its complexity, uncertainty and competiveness.
The consultation therefore sets out a number of possible options for reform of the SSE:
- A new, more comprehensive exemption: this would have minimal requirements but be backed up by anti-avoidance provisions.
- Exemption subject to a trading condition for the investee (the company disposed of): the current requirement for the investor (the company making the disposal) to be a member of a trading group would be removed.
- Exemption subject to an investee test other than trading: potentially extending this to also include carrying on a business or conducting certain specified activities.
- Amended trading tests for the investee and investor: a focus on the individual companies only rather than the group, or extending the test beyond trading.
- Changing the definition of ‘substantial shareholding’: the Government are sceptical about lowering the current 10% threshold however.
The consultation document also includes some more detailed potential changes on:
- The treatment of funds.
- The treatment of partnership and entities without share capital in the trading conditions.
- Extending the qualifying period over which the 10% shareholding requirement can be met from 2 to 6 years.
- Issues caused by the post-sale trading requirements.
Comments are invited on any issues with the SSE in its current form as well as the various options and changes proposed.
The consultation runs until 18 August. Further announcements will be made in the Autumn Statement with possible legislation in Finance Bill 2017.
Link to consultation document: Reform of the Substantial Shareholdings Exemption