IFM30005 - Real Estate Investment Trust : Joint ventures: introduction
CTA2010/Part 12/Chapter 10 deals with UK-REITs and joint ventures. Although joint ventures may take many forms, ranging from limited companies, through partnerships to contractual arrangements, the legislation deals only with joint ventures carried out through a limited company or a group of companies (as determined by CTA2010/S606 see IFM21060). Where the legislation applies and the UK-REIT gives notice, the joint venture company or members of the joint venture group are treated for most purposes of the UK-REIT rules in the same way as members of a Group REIT.
In the guidance (but not in the legislation) the notice is referred to as a ‘look through’ notice.
Vehicles outside Chapter 10
For vehicles that are transparent, such as partnerships or contractual arrangements, the normal UK-REIT rules apply. For most purposes (including computing exemption of qualifying profits from tax), the proportion of the underlying assets, profits etc. are attributed to the UK-REIT, according to their interest in the venture. This is dealt with in more detail in IFM29010 onwards.
For other vehicles no account is taken of the assets and activities of the joint venture in applying the various conditions and tests in the regime. The value of the UK-REIT’s interest in the venture is an asset of the residual business and income arising is residual income, regardless of the nature of the activities undertaken by the joint venture.
Terms used in legislation and guidance: CTA2010/S584 and S585
Joint Venture company: a company carrying on a property rental business where an interest in the company is held by a company UK REIT or by a member or members of a group UK REIT.
Joint Venture group: a group of companies, one or more of which carries on a property rental business (the ‘joint venture’), where an interest in the joint venture is held by a company UK REIT or by a member or members of a group UK REIT.
Venturing company or group: the REIT company or group that has given a look through notice in respect of a joint venture company or group.
The legislation covers the following situations
- A single company REIT with a single company joint venture
- A group REIT with a single company joint venture
- A single company REIT with a joint venture group, and
- A group REIT with a joint venture group.
Where a joint venture company meets the necessary conditions and a look through notice has been given in respect of that company, the joint venture company is treated as if it were a member of the venturing group or, as the case may be, a member of a deemed UK-REIT of which the joint venture company and the venturing company are members (a deemed UK-REIT).
Where a joint venture group meets the necessary conditions and a look through notice has been given in respect of the group then each member of the joint venture group is treated as being a member of the venturing group, in the case of a venturing company then the each member of the joint venture group and the venturing company are treated as being members of a new group UK-REIT (a deemed UK-REIT).
Note that does not mean that group reliefs or any other provisions that apply between members of a group are extended to the joint venture company or joint venture group.
The effect of the notice is that assets, profits etc. of the Joint Venture company or group are included in the UK-REIT group/deemed group financial statements and are therefore taken into account in testing if the UK-REIT meets the conditions of the regime. To the extent of the interest of the UK-REIT in the joint venture, the profits and gains of its property rental business are exempt from CT and included in the calculation of the distribution requirement.