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HMRC internal manual

Company Taxation Manual

Investment trusts: general: approved and unapproved

ICTA88/S842(1), TCGA92/S100(1), TCGA92/S288(1)

Approved investment trusts

An approved investment trust is one which the Commissioners of HMRC are satisfied meets all of the conditions in section 842 ICTA 1988 (see CTM47205 onwards). Approval is given for and by reference to a particular accounting period and inorder to gain approval the conditions must be met throughout the whole of that accountingperiod. Detailed guidance on each of the conditions is given at CTM47200onwards.

An approved investment trust is subject to Corporation Tax on its income in the normal way, but is not subject to tax on any gains. This is because section 100(1) TCGA 1992 provides that gains accruing to an investment trust are not chargeable gains. Section288(1) TCGA 1992 makes it clear that references to an ‘investment trust’ in TCGA are to an investment trust that has been approved under section 842 ICTA 1988.

As well as the exclusion of gains that would otherwise be chargeable gains in accordance with the provisions of TCGA 1992, approved investment trusts also enjoy exemption from tax on certain capital profits arising from loan relationships and derivative contracts which would otherwise be taxable as income under the rules in Part 4 Chapter 2 FA 1996 and Schedule 26 FA 2002. Guidance on which profits are excluded is at CTM47300

Unapproved investment trusts

An ‘unapproved’ investment trust is one which has not been approved under section 842 ICTA 1988. These investment trusts are subject to Corporation Tax on all of their profits in the normal way and do not benefit from any of the exemptions described above.