EGL50500 - Introduction to joint ventures and minority interests in group companies: introduction and layout of guidance

There are special rules that deal with joint ventures and minority interests in group companies for the purposes of the EGL.

The legislation uses the concept of a “qualifying joint venture” (referred to as a JV in this guidance). This, broadly, is a company that is not a member of another group (but could be the principal member of its own group) and is substantially owned by a small number of shareholders. The definition of a JV for EGL purposes and the identification of its members are explained at EGL51000.

There are also rules that apply to a company that is a member of a group but has one or more “significant minority shareholders”, meaning one with a stake of 10% or more. More detail on the definition is at EGL52000.

The EGL legislation has a number of rules that address issues that arise in these structures -

Joint ventures

• A generating undertaking that is a JV, including a group headed by a JV, will be liable to EGL in its own right and be chargeable on its exceptional generation receipts above the £10 million revenue allowance.
• The corporate members of a JV will be chargeable to EGL in the same way and provision is needed to ensure that there is no multiplication of the revenue allowance: calculating exceptional generation receipts at the level of the JV in isolation may understate the aggregate level of exceptional UK generation receipts that arise across the JV and its members. Therefore, the amount of generation of the JV that is not charged because of a JV’s revenue allowance is attributed to its members. See EGL53000.

Group companies with significant minority shareholders

• A group may elect for a member to be liable to pay the share of the group’s EGL liability that relates to its own generation. This is intended to ensure that the liability is shared appropriately between the group and the minority shareholder. See EGL54000.

Further guidance

Special rules dealing with qualifying joint ventures that attribute generation receipts to participants are explained at EGL61000+.

Special rules dealing with qualifying group companies with significant minority investors that attribute generation receipts to those minority shareholders are explained at EGL62000+.

Guidance on the provision for the surrender of “shortfall amounts” is at EGL63000+.

As an alternative to the rules mentioned above, there is an option to elect for a joint venture or group company to be treated as transparent, for which guidance is at EGL64000+.