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Substantial shareholding exemption ‘uncertainty’

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Revenue & Customs Brief 29/11 explains HMRC’s view of the application of TCGA 1992 Sch 7AC (exemptions for disposals by companies with substantial shareholding) in relation to the activities of certain joint venture companies. 

Two aspects of the exemption can cause uncertainty as to whether a company is a 'trading company', or the holding company of a 'trading group' or 'trading subgroup', HMRC said.

‘Where a group has an interest in a company that does not fall within the definition of a “joint venture company” then whether that represents part of the group’s overall trading activities or constitutes a separate investment activity will be a question of fact and depend on the circumstances of the case.’

Similarly, a group ‘would not automatically be regarded as having a non-trading investment activity because it has an interest in an entity that does not have issued share capital’, HMRC said.