Trading companies?

My client owns 50% of a company (TopCo) that holds 50% of a joint venture (JV) development company. There are no trading activities carried on by TopCo.

Before 18 March 2015 and assuming that the 75% condition was met TopCo was deemed to be carrying on trading activities (see TCGA 1992 s 165A(7)). Since 18 March s 165A(7) has been removed from the legislation so holding the shares in the JV is no longer deemed to be a trading activity. However there might be an argument that the holding is part of the trading activities of the company.

If my client held the shares directly in the JV he would hold 25% (50% x 50%) and there would be no problem with entrepreneurs’ relief. But for commercial reasons he owns the 25% indirectly through his company. Why should he now be denied this relief when...