Modernisation of investment trust company rules - Mazars - United Kingdom
Modernisation of investment trust company rules
The Government has confirmed its decision, initially proposed in a consultation document published on 27 July 2010, to modernise the operation of the tax rules for investment trust companies.
This will ensure that these companies will become more effective players alongside other open ended vehicles in the fund marketplace.
Draft regulations will be published towards the end of April 2011 to supplement the primary legislation in Finance Bill 2011 and the new rules will take effect towards the end of 2011 or early 2012, subject to Parliamentary procedure.
The main changes will be as follows:-
Replacement of prescriptive investment restrictions with a spread of risk test
Currently an investment trust must derive its income wholly or mainly from shares and securities and must not at any time in its accounting period have a holding in another company that represents more than 15% by value of its total investments.
Under the new rules, an investment trust will be able to invest in funds, shares and other assets, subject to a “risk-spreading” test based on the published investment policy of the ITC. On the condition that the published policy is always adhered to and that it details the asset allocation, risk diversification, gearing and details of maximum exposures then the condition will be met. This is intended to retain the original intention of the prescriptive restrictions whilst giving greater investment freedom to the industry.
Access to the white list
Precisely because of the enhanced flexibility of investments, UK investment trusts will, more than ever, wish to ensure that their capital growth will retain the benefit of the exemption from corporation tax on chargeable gains. Unlike Authorised Investment Funds, they currently do not have access to the white list of transactions that would protect their activities from the interpretation that they are trading in securities, even though by definition they are diversely owned.
Removal of annual approval process
Currently, an investment trust must be approved as such for each accounting period. This will be replaced by a one-off approval, subject to withdrawal in case of breach, similar to the offshore funds reporting fund status mechanism. This arrangement will be more cost-effective.
For more information please contact:
Senior Manager, Financial Services Tax
Contact us
- Copyright 2012 - Mazars - United Kingdom
- RSS
- Site map
- Legal and privacy
- Accessibility
- Copyright 2012 - Mazars - United Kingdom
