Tax implications of operating and terminating a joint venture company
Produced in partnership with Sara Stewart of Vinson & Elkins RLLP and Arun Birla, Hannah Gray and Abigail Hung of Paul Hastings (Europe) LLP
Tax implications of operating and terminating a joint venture company

The following Tax guidance note Produced in partnership with Sara Stewart of Vinson & Elkins RLLP and Arun Birla, Hannah Gray and Abigail Hung of Paul Hastings (Europe) LLP provides comprehensive and up to date legal information covering:

  • Tax implications of operating and terminating a joint venture company
  • Operation of the JVCo
  • Termination of the joint venture
  • Connection in a joint venture context

This Practice Note considers the UK tax aspects of the operation and termination of a joint venture operated through a limited liability company (JVCo), a separate legal entity from the joint venture parties. For information on the tax aspects of the establishment of a JVCo, see Practice Note: Tax implications of establishing a joint venture company. It is assumed for the purposes of this Practice Note that the joint venture parties are UK tax resident corporate entities and that the JVCo is UK tax resident (for information on joint ventures with a non-UK element, see Practice Note: Tax implications of international joint ventures).

Operation of the JVCo

Extraction and taxation of the JVCo’s profits

As the JVCo is a separate legal entity, profits from its operation will accrue to the company itself rather than directly to the joint venture parties (as they would, for example, in a contractual joint venture or a joint venture partnership). If the joint venture parties wish to extract the profits, this is most commonly achieved by way of dividends.

Dividends are subject to corporation tax unless they fall within certain exemptions. The applicable exemptions depend on whether or not the receiving party is a small company (see Practice Note: What is a small company for the purposes of the distribution exemption?). The exemptions are broad and