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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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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 (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 (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.