Commentary

D3.117 Close investment holding company—pre 1 April 2015

Corporate tax
Corporate tax | Commentary

D3.117 Close investment holding company—pre 1 April 2015

Corporate tax | Commentary

D3.117 Close investment holding company—pre 1 April 2015

The regime dealing with the taxation of close investment holding companies was repealed from 1 April 2015 as the provisions were no longer needed due to the alignment, from that date, of the main rate and small profits rate of corporation tax (see D1.1201). The details in the rest of this note are of historical interest only. HMRC guidance on the old regime can be found in its Company Taxation Manual at CTM60700 onwards.

Where a close company fell within the definition of a close investment holding company there were additional anti-avoidance rules which meant that the small profits rate of corporation tax was not available to such a company1.

As such a close investment-holding company was charged to corporation tax on its profits (income and chargeable gains) calculated in the normal way, with no special restrictions on the deduction of interest payments, annual payments or management expenses2.

This meant that all the company's profits (not just its investment income) were chargeable at the main corporation tax rate. Consequently, if the company's profits did not exceed the lower limit (D1.1205) it suffered a permanent disadvantage by paying an additional amount of corporation tax.

Definition of 'close investment-holding company'

As its name suggests, a close investment-holding company was, in broad terms, a close company whose main purpose was to hold investments, but the statutory provisions described it in a negative

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