CG17952 - Taper relief: Trading company: shares in joint venture companies - attributing the activities of the JVC to the investing company: Taper relief does not apply to disposals before 6 April 1998 or after 6 April 2008

You may need to determine whether a shareholding held by one company in another is a qualifying shareholding in a joint venture company in deciding if the investing company is a trading company or the holding company of a trading group.

From 6 April 2000 paragraph 23 Schedule A1 provides that a qualifying shareholding in a joint venture company may be taken into account in deciding if the investing company is a trading company or the holding company of a trading group.

Where an investing company has a qualifying shareholding in a joint venture company the shareholding in the joint venture company may be disregarded and an appropriate proportion of the activities of the joint venture company are treated as being carried on by the investing company. These activities may then be taken into account in working out if the investing company is a trading company or a holding company and whether a group of companies is a trading group.

From 6 April 2000 to 16 April 2002

A joint venture company is a trading company or the holding company of a trading group in which five or fewer companies between them hold 75% or more of the ordinary share capital. Where shares are held by several members of a group, they are treated as being held by a single company for this purpose.

A qualifying shareholding is a holding of more than 30% of the ordinary share capital of the joint venture company. Where shareholdings are held by several members of a group, it is the aggregate holding that is used for the test.

An appropriate proportion is one that corresponds to the percentage of the ordinary share capital of the joint venture company that is held by the investing company or members of a group.

The phrase 'ordinary share capital' has the meaning given by Taxes Act/S832(1).

For periods from 17 April 2002

The requirement is that 75% of the ordinary share capital must be held by not more than 5 or fewer persons (previously this rule related to companies).

A qualifying shareholding is a holding of more than 10% (previously 30%)of the ordinary share capital of the joint venture company.

Also, para 23(7A) provides that for the purposes of para 23 the activities of a joint venture company that is a holding company and its 51% subsidiaries are to be treated as a single business. This means that intra-group activities (e.g. intra-group property rentals) are to be disregarded.

As any company that has 51% subsidiaries is a holding company you do not need to attribute the activities of the JVC in order to establish whether a company is a holding company.

On a disposal of shares after 17 April 2002 of shares held before then you need to apply the different JVC rules to the periods before and from 17 April 2002.