GREIT13040 - Joint ventures: Joint Venture Look-Through Notice: cessation of look through treatment
A joint venture look-through notice remains in effect until the venturing company or venturing group’s interest in the joint venture company falls below 40%. When that happens, the cessation provisions apply to the joint venture company in much the same way as they apply to a company that leaves a Group REIT, under regulations 7(2) and 13(3) SI 2006/2866:
- the property rental business carried on by the joint venture company ceases on the day the look-through notice ceases to effective;
- the joint venture company is deemed to have sold and immediately reacquired the assets involved in its property rental business on that day;
- chargeable gains and losses on the deemed sales are tax-exempt as they accrue to the tax-exempt part of the joint venture company; and
- transfer of the assets from the tax-exempt business of the joint venture company takes place so as to give rise to no balancing charges or allowances.
As with companies leaving a Group REIT, the cessation, deemed
sales etc relate only to the proportion of the joint venture
company owned by the venturing company (or group). For more detail
on how these apply in the group context, see
GREIT11305 onwards.
The Early Exit rules in sections 132 and 133 FA 2006 that
apply to companies leaving a Group REIT within ten years of joining
(modification is in paragraph 28 Schedule 17 FA 2006, as explained
in
GREIT06040 and
GREIT11320) do not apply to joint
venture companies.
Accounting period of joint venture company ends
The venturing company’s (or venturing group’s) interest in the joint venture company may fall below 40% part way through an accounting period. When the look-through notice ceases to be effective, this brings to an end the accounting period of the joint venture company (section 131(6) FA 2006) and the deemed sales, transfers etc take place on that day.
No carry forward of losses to post-notice periods
In the same way that losses etc arising in C (tax-exempt) cannot be carried for to set off against profits of C (post-cessation), neither can losses etc of the property rental business of the joint venture company that existed when the look-through notice was effective.
