Legislation was intended to benefit a group of companies

The taxpayer was a private limited company which provided services to the NHS. In advance of selling the business in June 2015 the company incorporated a wholly-owned subsidiary - MCS Ltd - to which it transferred its trade and assets. In May 2016 the taxpayer then sold its shares in MCS Ltd to a third party.

The taxpayer said the gain from the sale was exempt because the substantial shareholdings exemption (SSE) applied as a result of deeming provision (TCGA 1992 Sch 7AC para 15A). This allows for the ownership period to be treated as extended when there has been a transfer of trading assets to the investee company within the 12 months before the disposal.

HMRC disagreed saying the exemption applied only to a period in which the assets were held and used for the purposes of a trade by a company that was...