CG64082 | Business Asset Disposal Relief: trading company and holding company of a trading group - investments in joint venture companies - pre-18 March 2015

Entrepreneurs’ Relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date.

The following guidance is relevant only to the time before 18 March 2015.

Qualifying shareholding in a joint venture company

A qualifying shareholding in a joint venture company is defined in TCGA92/S165A(14).

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 10% or more of the ordinary share capital of the joint venture company.

Also, S165A(13) 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.

A company may have a qualifying shareholding in a joint venture company which is not in the same group as the investing company. In that case, in determining whether (a) the investing company is a trading company, (b) a group that the investing company is a member of is a trading group, or (c) the investing company is the holding company of a trading group, the following rules apply:-

• 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 the latter company’s ordinary share capital which it holds.