IFM14120 - Taxation of investment trusts - Introduction: Investment trust or investment company

Investment trusts

An investment trust is an investment company which has been approved as coming within the meaning of the term ‘investment trust’ as defined in CTA10/S1158. Broadly, that is a company that the HMRC Commissioners are satisfied meets conditions A to C as set out in S1158 (the ‘eligibility conditions’, see IFM14420 onwards) and that also meets the requirements of The Investment Trust (Approved Company) (Tax) Regulations 2011 (SI 2011/2999) (IFM14430 onwards) throughout the whole of an accounting period.

An investment trust is subject to Corporation Tax on its income in the normal way, but is not subject to tax on any chargeable gains (TCGA92/S100(1)).

Investment trusts also are exempt from tax on certain capital profits arising from loan relationships and derivative contracts which would otherwise be taxable as income. (IFM14230).

Other investment companies

An investment company is one which has not been approved under CTA10/S1158 or one which is no longer treated as approved (see IFM14560). Investment companies are within the charge to Corporation Tax and do not benefit from any of the exemptions available to an investment trust.