LAM03740 - Calculation of ‘I’ Income and chargeable gains: Substantial shareholdings exemption (SSE) and chargeable gains on loan relationships and derivative contracts

Gains from convertibles: SSE: special rules for life insurance companies

Where CTA09/PART7/S645 (convertible loans) applies to an asset, any chargeable gain is exempt under the SSE CTA09/S642 (see CFM55020).This is on condition that the holding of ordinary shares in the company into whose shares the asset is convertible, or for whose shares the security is exchangeable, amounts to at least 30% TCGA92/SCH7AC/PARA17(2). See LAM03720 for further information about SSE.

Derivative contracts and options over shares: SSE

TCGA92/SCH7AC contains an exemption from corporation tax on chargeable gains (and so prevents allowable losses) accruing to a company on the disposal of assets related to shares. These include securities that can be converted into or exchanged for shares; or an option to acquire or dispose of shares (see CG53010).

Where an option or security, held for the purposes of the company’s long-term insurance business, is disposed of any gain only benefits form SSE if the holding amounts to at least 30% SCH7AC/PARA17(2). It is immaterial whether the 30% is held to wholly or partly back long-term business. See examples in LAM03720.