Joint ventures: Joint Venture Look-Through Notice: interest cover test
The profits and financing costs of the joint venture are taken into account in deciding whether the interest cover test is met.
Venturing company - regulation 6(3) SI 2006/2866
Regulation 3 is to be amended to take the changes to S115 by FA 2007 into account, guidance will be amended
For a venturing group, the same effect is achieved by way regulations 6 and 9 of the Financial Statement regulations (SI 2006/2865). Regulation 9 brings the profits, expenses etc of the joint venture company into the group’s financial statements. Regulation 6 then provides the rule for working out Financing Costs (External) that includes the joint venture company’s financing costs. These numbers then feed into the paragraph 14 Schedule 17 FA 2006 modification of the interest cover test that applies to a Group REIT. This is explained in GREIT12150 onwards.
Joint Venture groups.
For a single company REIT with a joint venture group the computation is at Regulation12 SI2007/3425. For a group with a group joint venture the figures from the joint venture group are fed into the financial statements and the group computation for the profit finance cost ratio at Para 14 schedule 17 is used.