CG64081 - Entrepreneurs’ Relief: trading company and holding company of a trading group - investments in joint venture companies
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.
TCGA92/S165A 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.
Qualifying shareholding in a joint venture company
A qualifying shareholding in a joint venture company is defined
in TCGA92/S165A (12).
A company is a joint venture company if 75% of its ordinary
share capital is held by not more than 5 persons.
A qualifying shareholding is a holding of more than 10% of
the ordinary share capital of the joint venture company.
Also, S165A (12) provides that 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.
Where a company has a qualifying shareholding in a joint
venture company, and the joint venture company is not in the same
group as the company, then, in determining whether: (a) the company
is a trading company, (b) a group that the company is a member of
is a trading group, and (c) the company is the holding company of a
trading group,
- the holding of any shares or securities that the company holds in the joint venture company is disregarded, and
- the company is treated as carrying on a proportion of the activities of the joint venture company equal to the proportion of that company's ordinary share capital it holds.
