SUBSTANTIAL SHAREHOLDING EXEMPTION

Sellers of businesses often approach us to seek insurance for the risk that their proceeds of sale of their businesses are subject to tax on the basis they may not qualify for the substantial shareholding exemption.

The amount of tax at stake is often large in the context of the transaction and sellers want certainty on this point. In some cases it can be difficult to be certain as to whether all of the conditions for this exemption to be available have been met. We have also seen many sellers apply to Her Majesty’s Revenue & Customs to seek clearance on the availability of the exemption but are often unable to obtain a clearance from the tax authorities at all or within the time period required for the deal. This often leaves sellers with material uncertainty in the transaction and an insurance policy can provide cover for the risk the exemption is not available to provide the requisite certainty.

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