7.28 The JV and its advisers will need to consider numerous tax issues, concerning both direct and indirect taxation. A number of these are listed below. The tax implications of setting up a JV should be carefully thought through.65 The type of JV used will be important both for the commercial viability of the entity established and for attracting private sector investment and care should therefore be taken, with tax advice as appropriate, to ensure any tax aspects are understood at an early stage. Annex G lists a number of direct tax issues affecting a JV and provides a comparison between corporate JVs and those constituted as partnerships.
7.29 Tax issues go well beyond the fairly straightforward differences between the corporation tax arrangements as between companies and unincorporated vehicles. Other issues include the complexities of VAT exposure and stamp duty arrangements where significant property assets are involved. Tax considerations, however, should not affect the aims and objectives of the JV and it is crucial that arrangements made are both practical and credible. Reference should also be made to the guidance issued by the HM Treasury Office of Accounts Team.66
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65 There will be, e.g., differing tax implications for a JV company compared to other options such as in-house, or a contractual relationship with the private sector.
66 www.hm-treasury.gov.uk/psr_index.htm examples include DAO 08/03 "Tax Planning and Avoidance" and DAO06/00 "Use of external tax advice by government departments" if relevant. Note that these letters are incorporated into Managing Public Money 4.2.6 and Anne 4.4 para 16.