Supporting a renewable energy developer to maximise tax-efficient project disposals

Background

Our client, a renewable energy development group specialising in wind, hydro and storage, was leading multiple projects at different stages of development. Tax planning and efficient structuring were key to maximise investment returns.

Having provided compliance and advisory services over many years and with extensive experience in the renewable energy sector, our team were well placed to provide advice tailored to the unique challenges and opportunities associated with project development and disposal.

How we helped

A key area of advice centred on the Substantial Shareholdings Exemption (SSE), a valuable corporation tax relief available on the disposal of shares in qualifying trading subsidiary companies (which can be based in the UK or overseas).

For renewable energy developers, this relief can be particularly beneficial. By structuring individual projects in separate subsidiary companies, this allows a completed project to be sold through a share sale rather than an asset sale. Where SSE applies, the gain on disposal can be exempt from corporation tax, and a greater proportion of the proceeds can be reinvested in future projects.

‘Trading’ is the key word here. Companies that are dormant or hold non-trading activities are unlikely to qualify. The exemption is also subject to certain conditions, including minimum shareholding and ownership period requirements. [JA1]

We advised the client on these rules and how they applied to their group structure, enabling them to plan effectively for future project disposals while maintaining compliance with the legislation.

We analysed the group structure and planned activities, advising on the best structure to facilitate the correct tax elections to take advantage of the available reliefs, while managing risk for the development of the various projects.

Results

The client was able to maximise the relief available through SSE on project sales in the most efficient manner possible, allowing net of tax gains to be maximised and provide more funds for reinvestment in new projects.