ACCA Advanced Taxation (ATX) Practice Exam

What qualifies as a substantial holding under the Substantial Shareholdings Exemption (SSE)?

1. A holding of 5% for at least 12 continuous months

2. A holding of 10% owned for at least 6 months

3. A holding of at least 10% owned for at least 12 continuous months

4. A holding of 15% that is owned indefinitely

The correct answer is: A holding of at least 10% owned for at least 12 continuous months

The Substantial Shareholdings Exemption (SSE) allows certain shareholders to gain relief from capital gains tax when disposing of their shares in trading companies, provided they meet specific criteria regarding the size and duration of their holdings. The criteria specify that the shareholder must own at least 10% of the ordinary share capital of the company for a minimum continuous period of 12 months immediately prior to the disposal of the shares. In the context of the correct choice, a holding of at least 10% that is owned for at least 12 continuous months directly meets these requirements. This threshold is designed to ensure that the exemption is only granted to significant, long-term shareholders, thereby promoting stability within the equity markets and supporting companies through investor commitment. The other options do not satisfy the SSE conditions. A holding of 5%, regardless of the time period, falls below the minimum percentage required. Similarly, a holding of 10% for only 6 months does not meet the time requirement, as the exemption specifically states a minimum of 12 continuous months. Lastly, while a holding of 15% might suggest a significant stake, the indefinite ownership term does not align with the structured time commitment required by the regulation. Thus, the correct answer