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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Substantial shareholdings exemption: introduction - the exemptions available

TCGA92/SCH7AC/PART1

Part 1 of Schedule 7AC TCGA 1992 (paragraphs 1 to 6) contains the rules relating to the exemptions available. If all the conditions for the relief are met, a gain accruing to a company is not a chargeable gain in three situations:

  • the main exemption (in paragraph 1), that covers gains on disposals of shares or an interest in shares;
  • the first subsidiary exemption (in paragraph 2), that covers gains on disposals of assets related to shares; and
  • the second subsidiary exemption (in paragraph 3), that covers gains on disposals of shares, interests in shares or assets related to shares where certain of the conditions for the main exemption are not met at the time of the disposal but all the conditions were met previously.

However, none of the exemptions is available if a specific anti-avoidance provision (paragraph 5) applies or in some other limited cases (paragraph 6).

Note that if a transaction would have resulted in an exempt gain (or non-allowable loss) but for certain legislation that normally deems there to have been no disposal, that legislation is disapplied (paragraph 4) so that there is a disposal that yields an exempt gain (or non-allowable loss).

No claim for relief is required. When all the conditions for the relief are met a gain is automatically exempted. The general rule in section 16(2) TCGA 1992 that where a gain is not a chargeable gain a loss is not an allowable loss applies (see CG15800). So a loss arising on a disposal in circumstances where, should a gain have arisen instead it would have been exempt, is not an allowable loss.

The detailed guidance on the exemptions available is organised as follows:

CG53155 The main exemption for shares and interests in shares
   
CG53160 The subsidiary exemption for assets related to shares
CG53165 The subsidiary exemption where the conditions for the main exemption were previously met
CG53170 Application of exemption in priority to no disposal rule
CG53175 Anti-avoidance measure to prevent inappropriate exemption - submission to Capital & Savings before arguing case
CG53180 Anti-avoidance measure to prevent inappropriate exemption - the legislation
CG53185 Anti-avoidance measure to prevent inappropriate exemption - Statement of Practice
CG53190 Other cases excluded from exemption