A limited company client has held a 100% shareholding in a trading subsidiary for many years. It will shortly be disposing of the shares to another company at a gain, with the entire proceeds being in loan notes.

Can the substantial shareholding exemption apply where loan notes are received, or will the disposal be a chargeable gain for corporation tax purposes?

A: Where a company (A) disposes of shares in another company (B) it is possible that any gain (or loss) arising will not be chargeable/relievable for corporation tax purposes under the substantial shareholding exemption (SSE).