Investment trusts

An investment trust is a pooled investment vehicle in the form of a listed UK tax resident public limited company. Despite its name, therefore, in legal terms an investment trust is a company and not a trust.

An investment trust enjoys certain UK tax benefits where it is approved by HMRC.

Investment trusts share many characteristics with collective investment schemes, however investment trusts are closed-ended fund vehicles and therefore do not constitute collective investment schemes. Investment trusts do qualify as alternative investment funds for regulatory purposes.

As a UK tax resident company, an investment trust is within the charge to UK corporation tax. However, where it has been approved by HMRC for a given accounting period it benefits from an exemption from UK corporation tax on chargeable gains. In addition, approved investment trusts are exempt from tax on certain profits or losses of a capital nature that would otherwise be taxed as income under the loan relationships or derivative contracts regimes.

Eligibility conditions and ongoing requirements

A company must meet the following eligibility conditions and ongoing requirements throughout each accounting period for which it wishes

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Tax News

Tax weekly highlights—1 May 2025

This week's edition of Tax weekly highlights includes: (1) coverage of the numerous ‘Tax update spring 2025’ announcements and publications, (2) an update from the CIOT on the LLP salaried member rules and (3) News Analyses on the Upper Tribunal’s (UT) decision on an SDLT overpayment relief claim (L-L-O Contracting Ltd) and on the First-tier Tax Tribunal’s (FTT) decisions on (i) the remedy available under FA 2003, Sch 10, para 34 when no other SDLT relief is available (Candy), (ii) the effect of liquidation on a director loan (Quillan) and (iii) a legislative drafting error in respect of the temporary reduced rate of VAT (JD Wetherspoon).

Tax update spring 2025—Tax analysis

Tax analysis: On 28 April 2025, the government announced a package of technical tax policy proposals aimed at simplifying and reforming the tax system and improving tax administration. These announcements included the publication of draft legislation, new consultations, various technical papers and responses to consultations, as well as updates on previously announced measures together with new initiatives.

Upper Tribunal denies SDLT overpayment relief in failed late MDR claim (L-L-O Contracting Ltd and others v HMRC)

Tax analysis: In L-L-O Contracting Ltd and others v HMRC, the Upper Tribunal (UT) dismissed the companies’ appeals against the First-tier Tax Tribunal’s (FTT) decision to dismiss appeals against HMRC’s decision not to allow claims to SDLT overpayment relief. The companies had not claimed multiple dwellings relief (MDR) in their SDLT returns and, having missed the time limit for making the claims, sought to obtain the relief by way of overpayment relief claims under paragraph 34 of Schedule 10 of the Finance Act 2003 (FA 2003).

FTT concludes cider supplies did not benefit from temporary reduced VAT rate (JD Wetherspoon PLC v HMRC)

Tax analysis: In JD Wetherspoon PLC v HMRC, the FTT decided that for the purposes of the temporary reduced VAT rate for hospitality and tourism, cider should be classified as an ‘alcoholic beverage’ and thus excluded from the reduced rate. The issue arose because a drafting error in the relevant legislation meant that cider was not included in the definition of an alcoholic beverage, however, the FTT applied the Inco principle to correct obvious drafting errors, and the taxpayer claim was therefore dismissed.