Substantial_shareholdings_exemption
The substantial shareholdings exemption is an exemption from assessment of capital gains under corporation tax applicable to United Kingdom companies. The exemption is found in Schedule 7AC of the Taxation of Chargeable Gains Act 1992.
The rationale for the exemption is that groups of companies should be able to restructure without having to concern themselves with taxation of capital gains.
Other European jurisdictions apply a more comprehensive system. For example, in Luxembourg and the Netherlands as well as in Germany and Belgium, both capital gains derived from, as well as dividend income earned on, qualifying shares are (mostly) exempt from further local taxation. These comprehensive systems are generally referred to as participation exemption systems.