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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief: trading company and holding company of a trading group - investments in joint venture companies - overview

You may need to determine whether a shareholding held by one company in another is a qualifying shareholding in a joint venture company.

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. The rules differ however depending on the date of disposal of the shares in the investing company. See CG64082 for the rules up to 18 March 2015.

FA2015/S43(2) introduced TCGA92/S169S(4A)(a) with effect from 18 March 2015 so that the special attribution rule for joint venture companies (see CG64083 for detail) no longer applies for Entrepreneurs’ Relief purposes when considering whether a company is a trading company or the holding company of a trading group.

FA2016 however made further changes and omitted TCGA92/S169S(4A) such that it never had effect. Instead, TCGA92/SCH7ZA provides for attribution subject to certain conditions being met (see below). What follows is therefore for information purposes only:

The effect of TCGA92/S169S(4A) was that a company or the members of the group had to be carrying on the activity themselves  – with no substantial non-trading activity – for the company to qualify as a trading company or the holding company of a trading group for Entrepreneurs’ Relief purposes.

The coming into force of this rule, where that meant that a company was no longer a trading company or a member of a trading group, did not mean that a company was treated as ceasing to be a trading company etc. for the purposes of potential entitlement to Entrepreneurs’ Relief under TCGA92/S169I, see FA2015/S43(4).