Commentary

D1.1035 Substantial shareholding exemption—Joint venture companies

Corporate tax
Corporate tax | Commentary

D1.1035 Substantial shareholding exemption—Joint venture companies

Corporate tax | Commentary

D1.1035 Substantial shareholding exemption—Joint venture companies

In the absence of special provisions, a group which holds one or more joint venture investments, where ownership is less than 51%, might find that what would otherwise be a trading group is tainted by the holdings of the investment or investments for the purpose of the substantial shareholding exemption (SSE). To prevent this there are provisions providing for look through of certain joint venture investments, treating the investing group and the joint venture company as if they were one. Thus, a minority shareholding which would otherwise be treated as an investment can help towards establishing trading status for the company making the investment.

The rules apply where a company has a qualifying shareholding in a joint venture company. These terms are defined in the legislation1.

HMRC have confirmed their opinion that where a group has an interest in a company that does not fall within the definition of a joint venture company then whether that represents part of the group's overall trading activities or constitutes a separate investment activity will be a question of fact and depend on the circumstances of the case. Where, for example, the effective management of the joint enterprise is closely integrated with that of the group and it conducts a trade that is similar to or complements that of the wider group, then that would suggest that group's involvement in the enterprise does not represent a separate non-trading activity. Similarly, a group would not automatically be regarded as having a

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