Commentary

D7.332 Definition of an investment trust

Corporate tax
Corporate tax | Commentary

D7.332 Definition of an investment trust

Corporate tax | Commentary

Investment trusts—post 1 January 2012

D7.332 Definition of an investment trust

For accounting periods beginning on or after 1 January 2012, the definition of an investment trust was simplified. The stated intention behind these changes is to remove unnecessary restrictions on a company's commercial activities, provide increased certainty for investors and provide a more flexible framework that prevents unintended tax advantages being gained through investing in an investment trust company while ensuring a proportionate approach for minor inadvertent breaches.

Conditions for approval

For accounting periods beginning on or after 1 January 20121 a company is an investment trust if it meets the following conditions A to C (the 'eligibility conditions'), any conditions specified in regulations and is also approved by HMRC.

The eligibility conditions are as follows2:

  1.  

    (a)     all or substantially all, of the business of the company is investing in shares, land or other assets with the aim of spreading investment risk and giving the members of the company the benefit of the results of the management of the funds. This represents a relaxation of the previous rules which required an investment trusts' income be 'wholly or mainly from shares or securities' and that a holding in an investee

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