EGL64300 - Election to treat a joint venture or group company with significant minority shareholders as transparent: effect of making an election

F(2)A23/S301 sets out the consequences where a company elects to be treated as transparent for the purposes of the electricity generator levy. In general terms, the company will be treated in a similar way to a partnership and each shareholder is treated in the same way as a partner entitled to a share of the business carried on by the company equivalent to their proportionate interest in the company. EGL40000 describes the treatment of partnerships for EGL purposes.

This means that each shareholder has attributed to it a proportionate share of the generation receipts and allowable costs of the company to which the election applies.

Where the election is made by a company which is a member of a group (other than a joint venture company), then –

• it is only the generation etc. of that company and its wholly owned subsidiaries that is affected by the election, and
• the treatment extends to any wholly owned subsidiaries of the company that is the subject of the election and such subsidiaries’ wholly owned subsidiaries and so on.

A wholly owned subsidiary is one with only one shareholder, treating members of a group “under” the company subject to the election as a single shareholder.

A company that is subject to a transparency election is to be jointly and severally liable for any amount of the EGL which its shareholders (or the generating undertaking of which any shareholder is a member), is liable to pay as a result of making an election.

Where the qualifying period of a shareholder in a company that is the subject of transparency election does not coincide with that of the company itself then it will be necessary to make an apportionment on a fair and reasonable basis.