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HMRC internal manual

Capital Gains Manual

Substantial shareholdings exemption: the substantial shareholding requirement - aggregation of shares held by group companies


In deciding whether a company that is a member of a group holds a substantial shareholding paragraph 9 Schedule 7AC TCGA 1992 allows the shares held by all members of the group to be aggregated. CG53006 explains what is a group for the purposes of the substantial shareholdings legislation.

For example, suppose a group comprises a holding company and a subsidiary. The holding company has 7% and the subsidiary 5% of the ordinary share capital of another company. Then

  • both the holding company and the subsidiary are treated as having 12% of the other company’s ordinary share capital, and
  • each is treated as being entitled to the rights to distributable profits and assets that the other enjoys, as well as those rights it enjoys itself,

for the purposes of establishing whether the substantial shareholding requirement is met.

Paragraph 17 of Schedule 7AC modifies the rules governing when some shareholdings held by life assurance companies can be aggregated, but the taxation of insurance companies is not covered in detail by this manual (see CG69007). There is guidance on paragraph 17 in the Life Assurance Manual at LAM4A.162 onwards.

For disposals on or after 1 April 2017, paragraph 9 is extended by F(2)A 2017 to take effect, both for the purposes of paragraph 7 (the substantial shareholding requirement) and for the purposes of paragraph 8A(2) (the additional definition of “substantial shareholding” for holdings costing at least £20m where the investing company is owned 25% or more by Qualifying Institutional Investors.  SEE CG53011