IFM14536 - Types of breaches: serious breaches

A ‘serious breach’ is a breach which is either specified as a serious breach by the regulations, or is not a ‘minor breach’ (see IFM14534). For this purpose a minor breach which is rectified in accordance with regulation 25(5) of SI 2011/2999 is ignored. This means that, in addition to specified serious breaches (see below) , a serious breach can arise for example as a result of a breach for which there is not a reasonable excuse or which could not be viewed as inadvertent or is not corrected as soon as reasonably practicable.

In practice, this would require either some deliberate action (or non-action) or neglect. For example, if an investment trust became aware of a breach of any of the requirements and then chose not to notify the breach (even if that breach had been corrected) it would clearly be in breach of regulation 24 which requires an investment trust to notify all breaches to HMRC and the breach could not be viewed as a minor breach.

Specified serious breaches

The regulations (SI 2011/2999) specify the following as serious breaches:-

• being a close company (see IFM14430);
• the last breach in a specified number of breaches within a certain period (see IFM14540); and

a failure to meet the income distribution requirements in Chapter 3 of Part 2 of the regulations, where the sum which ought to have been distributed but was not exceeds a specified amount (see IFM14550).