CFM95345 - Interest restriction: groups, periods and financial statements: the worldwide group: relevant entity: JPUTs

TIOPA10/S474

An entity can only be an ultimate parent if it is a relevant entity.

A Jersey Property Unit Trust (JPUT) is a legal structure whereby legal ownership of assets (primarily non-Jersey real estate) is vested in one or more trustees who hold the assets on trust for the benefit of unitholders upon the terms of a written trust instrument.

For UK tax purposes, a JPUT is considered to be transparent for income purposes. This means that the trustee of the JPUT (the Trustee) is not taxable in respect of the income of the JPUT. Instead, the income is taxable in the hands of the unitholders as it arises. By way of an example, rental income from UK property owned by a JPUT is subject to tax in the hands of the unitholders as profits from a UK property business. 

Examples of structures

Scenario 1

A UK tax resident company (Corporate Unitholder) is the sole unitholder in a JPUT, where the JPUT is party to a loan relationship and derivative contract.

Scenario 2

A Corporate Unitholder is the sole unitholder in a JPUT, which in turn is the sole limited partner in a limited partnership (Partnership), where the Partnership is party to a loan relationship and derivative contract.

Scenario 3

A Corporate Unitholder is the sole limited partner in a Partnership, which in turn is the sole unitholder in a JPUT, where the JPUT is party to a loan relationship and derivative contract.

Relevant entity

In each of the structures above, the Corporate Unitholder is a relevant entity for CIR purposes.  Neither the Partnership nor the JPUT can be a relevant entity, and so cannot be the ultimate parent of a CIR worldwide group.