Finance Act 2022

40 Attributable joint venture profits and losses

(1) For the purposes of section 38, the amount of any joint venture profits or losses attributable to an RP developer for an accounting period is determined in accordance with this section and—

(a) joint venture profits means the RPD profits of a relevant joint venture company so far as they fall below the joint venture company’s allowance for that period (and, accordingly, the joint venture company is not charged to the tax in respect of them), and

(b) joint venture losses means the RPD losses of a relevant joint venture company.

(2) A company (“C”) is a relevant joint venture company for the purposes of this Part if—

(a) C is an RP developer or a company which is a member of the same group as C is an RP developer,

(b) C is not a 75% subsidiary of another company, and

(c) there are five or fewer persons who between them—

(i) hold 75% or more of C’s ordinary share capital, or

(ii) in a case where C does not have ordinary share capital, are beneficially entitled to 75% or more of C’s profits available for distribution to equity holders of C.

(3) In determining whether there are five or fewer such persons as are mentioned in subsection (2)(c), members of a group are treated as if they were a single person.

(4) Joint venture profits or losses are attributable to an RP developer if the RP developer, or the RP developer together with any other company which is member of the same group as the RP developer, has or have a substantial interest in the relevant joint venture company; but, in relation to the attribution of joint venture losses, this is subject to subsection (5).

(5) Joint venture losses are attributable to an RP developer only if the RP developer and the relevant joint venture company both so elect by notice to an officer of Revenue and Customs no later than the end of the period of 2 years beginning with the last day of the accounting period of the RP developer for which the losses are to be attributed.

Any payment made in consequence of the election is (so far as not exceeding the amount attributed) not to be taken into account in determining the profits or losses of either company under section 39 (adjusted trading profits and losses).

(6) The amount that is attributable to the RP developer is an amount equal to the percentage of the joint venture company’s profits that are available for distribution to equity holders and to which the RP developer is entitled.

(7) If a relevant joint venture company’s accounting period does not coincide with the RP developer’s accounting period—

(a) for the purposes of subsection (1)(a), the joint venture company’s allowance for a period, and

(b) the amount of joint venture profits or losses allocated to the RP developer under subsection (6),

are to be apportioned on a time basis according to the lengths of the periods falling in different accounting periods of the RP developer.

(8) Where a relevant joint venture company is a member of a group, the references in subsection (1) to the RPD profits or losses of the relevant joint venture company are to the net amounts of RPD profits or losses of the members of the group.

(9) For the purposes of subsection (8), if the accounting period of a member of the group does not coincide with the relevant joint venture company’s accounting period, the net amount of its RPD profits or losses is to be apportioned on a time basis according to the lengths of the periods falling in different accounting periods of the relevant joint venture company.

(10) Subsection (11) applies where joint venture company losses of a relevant joint venture company are attributed to an RP developer under this section.

(11) For the purposes of this Part—

(a) the amount that is available to be carried forward or surrendered by the relevant joint venture company under Schedule 7 is reduced by the amount that is attributed to the RP developer;

(b) the amount that is available to be carried forward or surrendered by any other member of the same group under Schedule 7 is reduced by so much of the amount within paragraph (a) as is derived from the losses of that member.

(12) For the purposes of this Part a company or companies has or have “a substantial interest” in a relevant joint venture company (“the JV”) if—

(a) the company or companies hold at least 10% of the ordinary share capital of the JV, or

(b) in a case where the JV does not have ordinary share capital, the company or companies are beneficially entitled to at least 10% of the profits of the JV that are available for distribution to equity holders of the JV.