In M Group Holdings Limited v HMRC [2023] UKUT 213, the Upper Tribunal (UT) confirmed that the Substantial Shareholding Exemption (SSE) legislation could not be interpreted to allow looking through the ownership of a trade back to a time when there was not a group when assessing the 12-month holding period requirement.

  • The appellant was a company wholly owned by Mr Peter Jeffreys who provided services under NHS contracts to hospitals and clinics. 
  • Mr Jeffreys received an interest in the business from potential buyers, but ongoing tax enquiries meant that a sale of the company was not an attractive prospect. Following tax advice, the appellant incorporated a 100% subsidiary (Medinet Clinical Services Ltd) on 29 June 2015.
  • On 30 September 2015, the appellant hived down its trade and assets to its subsidiary.
  • On 27 May 2016, the appellant sold the shares in the subsidiary for £54,874,324 and claimed SSE.
  • In March 2019, HMRC issued a Closure Notice, disallowing SSE relief and reinstating the Corporation Tax liability on the gain of just over £10 million.
  • M Group Holdings Ltd appealed to the FTT.

The facts were not disputed, nor was the position that the appellant had not held the substantial shareholding for the requisite 12-month period. M Group Holdings Ltd appeal to the First Tier Tribunal (FTT), was on the basis that the extension of SSE in para 15A Sch7AC TCGA 1992 applied here. This is effectively a 'look-through' provision. The FTT dismissed the appeal and an appeal was made to the UT.

  • Para 15A extends the holding period of the investing company to include the time when the investee's trading assets were held by another group member provided:
    • The investing company had a substantial shareholding at the time of the disposal.
    • The asset was used in the trade of the investee company at the time of the disposal.
    • The investing company, investee and other group company (if there was a separate company holding the asset) were all members of the same group at the time of the asset transfer.
    • The asset was used in the trade of another group member and during that time, it was a member of the group.

In the 12 months to disposal, during the period from 28 May 2015 to 29 June 2015, M Group Holdings operated the trade as a stand-alone company. The appeal was based on the grounds that the legislation should be interpreted so as not to discriminate against single companies, where the qualifying assets were held prior to the substantial shareholding and, in the absence of this argument, a single company could be considered part of a group.

The UT considered these arguments and found:

  • That whilst there is no definition of a group in the legislation, it should be interpreted on its ordinary meaning.
  • Despite the appellant's KC using non-tax examples of when a group can have only one member, the dictionary definition describes a group as having at least two or more members.
  • Whilst there was a discrepancy in the treatment of single companies and companies with a dormant subsidiary, there was no doctrine requiring equal treatment for economically equivalent businesses. There were differing tax treatments for single companies compared to groups and this was one of them.

The appeal was dismissed.


The failure to qualify for SSE caused the KC to use some original arguments in support of alternative interpretations of widely accepted legislation. What is not clear is why a business that had received advice on a hive-down (and presumably claiming SSE) did not wait an additional month to qualify for the relief. That one month cost the business £10 million.

Useful guides on this topic

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

What qualifies as a group for tax? How do you form a group? Which definition of a group applies for different types of tax? What are the benefits of being in a group?

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

External links 

M Group Holdings Limited v HMRC [2023] UKUT 213

M Group Holdings Limited v HMRC [2021] TC08054


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