Investment companies and companies with investment business

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Investment companies and companies with investment business
  • Distinction between trading and investment companies
  • Companies with investment business ― definition
  • Making investments
  • Definition of investment company pre-FA 2004
  • Investment company computations

Investment companies and companies with investment business

Distinction between trading and investment companies

The distinction between trading and investment companies is important for a number of reasons. For instance, the rules relating to the expenses which are allowable for tax purposes can differ between the two types of company. Broadly speaking, trading companies are able to deduct allowable revenue expenses from trading income, and investment companies can deduct expenses incurred in managing investments. Further information regarding the deductibility of these types of expenses, together with details of exclusions, can be found in the Management expenses guidance note.

In addition to this, the options available for relieving excess management expenses also differ from trading loss relief, see the Excess management expenses guidance note.

Until 31 March 2004, an investment company was defined as ‘any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom’. This definition is still relevant for certain purposes and is considered in further detail below.

Companies with investment business ― definition

A ‘company with investment business’ is the term used in the legislation for an investment company. It is simply defined as ‘a company whose business cons

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