Joint ventures: Joint Venture Look-Through Notice: effects of notice
When the notice comes into effect, the consequences for the joint venture company or group are the same as for a company that joins an already established Group REIT:
- the property rental business previously carried on by the joint venture ceases on the day the look-through notice becomes effective;
- the joint venture is deemed to have sold and immediately reacquired the assets involved in its property rental business on that day;
- chargeable gains and losses on the deemed sales are ignored;
- transfer of the assets to the tax-exempt business of the joint venture company takes place so as to give rise to no balancing charges or allowances;
- the joint venture is required to pay an Entry Charge equivalent to 2% of the market value of the assets involved in the property rental business at the date the look-through notice becomes effective; and
- income and gains of the property rental business of the joint venture are exempt from CT.
As with companies joining a Group REIT, the cessation, deemed sales etc relate only to the proportion of the joint venture owned by the venturing company (or group). For more detail on how these apply in the group context, see GREIT11305 onwards.
The venturing company must prepare financial statements that cover the activities of it and the joint venture company in the same way as the principal company of a Group REIT prepares financial statements for the group’s activities (regulation 12 SI 2006/2866 and regulations 11 and 21 SI2007/3425) and see GREIT12120 for more detail). If the venturing company is involved in more than one joint venture, only one set of financial statements is required covering the activities of the venturing company and all its joint venture companies.
When the notice comes into effect, the consequences for the joint venture, as set out in regulation 13 SI 2006/2866 and regulations 13 and 23 SI2007/3425, are the same as for a company joining the group (see GREIT11505 onwards).
The principal company of a venturing group must include the activities of the joint venture companies for which it has given a look-through notice in the financial statements it is obliged to provide under paragraph 31 Schedule 17 FA 2006 (see GREIT12120).