In M Group Holdings Limited v HMRC [2021] TC08054 , the Frist Tier Tribunal (FTT) dismissed an appeal against a closure notice denying Substantial Shareholding Exemption as a group had not existed for 12 months prior to the disposal.

  • M Group Holdings (MGH), a standalone company, provided services under NHS contracts to hospitals and clinics.
  • The sole shareholder, Mr. Jeffreys, started to receive interest in the company but there were contingent tax liabilities which proved a deterrent.
  • On 29 June 2015 MGH incorporated Medinet Clinical Services Limited (MCS).
  • On 30 July 2015 MGH acquired the entire share capital of M5 Associates Ltd (M5) from Mr. Jeffreys at the par value.
  • On 30 September 2015 MGH transferred its trade and assets to MCS by way of hive down.
  • On 28 October 2015 M5 began to trade as a provider of short-term finance.
  • On 27 May 2016 MGH sold the entire share capital of MCS to a third party purchaser for £54m.
  • MGH filed its 2015/16 tax return on the basis that the MCS share sale qualified for Substantial Shareholding Exemption (SSE).
  • On 2 February 2018 HMRC opened an inquiry into the 2015/16 tax return.
  • HMRC issued a Closure notice on 27 March 2019 denying the claim for SSE.
  • As a result, the appellant became liable to a corporate tax charge of £10.6m.
  • Following an Appeal and a Statutory review, the appeal went to the FTT.

The FTT dismissed the appeal finding that:

  • The shares had not been held for a continuous twelve-month period in the two years prior to the disposal.
  • The application of SSE relied on meeting provisions that deemed the holding period condition to have been met.
  • The purpose of the deeming provisions based on the wording of the legislation is to extend SSE to the sale of shares in a group of companies that hold assets previously used by the group, even if those shares have not been owned by the group for the required period of time.
  • The legislation did not offer any guidance as to whether its purpose was extended to include relief for standalone companies acquiring and selling subsidiaries within 12 months.
  • The natural, ordinary meaning of the deeming provisions was that put forward by HMRC; that they treat the shareholder as holding the shares for only such a period as there is a group in existence.
  • As the appellant was only a member of a group from 29 June 2015, the date of incorporation of MCS, the deeming provisions do not extend the period of ownership to the required 12 months. As such SSE was not available.
  • Although this produces “an oddity or arbitrariness of SSE applying, or not, depending on whether there has been a separate, possibly dormant, subsidiary”, given that it was impossible to determine the obvious intention of the legislation the FTT could not say that this produced a wholly unreasonable result.


While this is only a FTT decision, this case does reinforce the view that retaining a dormant subsidiary in an otherwise standalone company is a sensible way to proceed if a sale of the company in the future is likely.

Useful guides on this topic

Substantial Shareholding Exemption
What is the Substantial Shareholding Exemption?  When does it apply?  

When the tax inspector calls
This section looks at policy on tax strategies/avoidance and tax investigation news, including serious fraud and disclosure facilities. From time to time we comment on any other topical HMRC activity.

Closure Notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights? 

Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Statutory Review
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

External Links

M Group Holdings Limited v HMRC [2021] TC08054

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