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HMRC internal manual

Guidance on Real Estate Investment Trusts

Joint ventures: Joint Venture Look-Through Notice: cessation of look through treatment

A joint venture look-through notice remains in effect until the venturing company or venturing group’s interest in the joint venture company or group falls below 40%. When that happens, the cessation provisions apply to the joint venture company or group in much the same way as they apply to a company that leaves a Group REIT, under regulations 7(2) and 13(3) SI 2006/2866 and regulation 13(9) and 23(9) SI2007/3425:

  • the property rental business carried on by the joint venture company ceases on the day the look-through notice ceases to effective;
  • the joint venture company 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 tax-exempt as they accrue to the tax-exempt part of the joint venture company; and
  • transfer of the assets from the tax-exempt business of the joint venture company takes place so as to give rise to no balancing charges or allowances.

As with companies leaving a Group REIT, the cessation, deemed sales etc relate only to the proportion of the joint venture company owned by the venturing company (or group). For more detail on how these apply in the group context, see GREIT11305 onwards.

The Early Exit rules in sections 132 and 133 FA 2006 that apply to companies leaving a Group REIT within ten years of joining (modification is in paragraph 28 Schedule 17 FA 2006, as explained in GREIT06040 and GREIT11320) do not apply to joint venture companies, however they apply to joint venture groups by regulation 26 SI2007/3425.

Accounting period of joint venture company ends

The venturing company’s (or venturing group’s) interest in the joint venture company or group may fall below 40% part way through an accounting period. When the look-through notice ceases to be effective, this brings to an end the accounting period of the joint venture company or group (section 131(6) FA 2006) and the deemed sales, transfers etc take place on that day.

No carry forward of losses to post-notice periods

In the same way that losses etc arising in C (tax-exempt) cannot be carried for to set off against profits of C (post-cessation), neither can losses etc of the property rental business of the joint venture company or group that existed when the look-through notice was effective.