ACCA Advanced Taxation (ATX) Practice Exam

Who can benefit from Substantial Shareholdings Exemption (SSE)?

1. Any individual shareholder

2. Only corporations that meet specific criteria

3. Only non-resident companies

4. Any qualifying partnership

The correct answer is: Only corporations that meet specific criteria

The Substantial Shareholdings Exemption (SSE) is a relief that allows certain types of companies, specifically those that meet defined criteria, to dispose of shares without incurring a liability to capital gains tax on the gains generated from those disposals. This exemption is primarily aimed at promoting investment and encouraging businesses to conduct transactions efficiently without the burden of tax. To qualify for SSE, a corporate entity must have held a substantial shareholding in another company for a defined period, typically at least 12 months within the last two years, and the shareholding must be at least 10% of the voting rights. Consequently, the exemption is specific to corporations that comply with these requirements, allowing them to engage in mergers, acquisitions, or other disposals while minimizing tax liabilities. The other choices do not encompass the correct context for benefiting from SSE. Individuals, non-resident companies, or partnerships do not fall within the specific framework set out for SSE eligibility, which is explicitly tailored to specific corporate entities that meet certain thresholds and ownership durations. Therefore, the focus on corporations meeting the criteria makes this answer the accurate one.