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HMRC internal manual

Corporate Finance Manual

Loan relationships: particular types of company: investment trusts and venture capital trusts: capital profits

Investment trusts and venture capital trusts: creditor relationships

Investment trust companies (ITCs) and venture capital trusts (VCTs) are UK resident companies subject to corporation tax, but for both gains are not chargeable gains (TCGA92/S100(1)).

For most companies, the loan relationship regime makes no distinction between capital and revenue profits (CFM33160). Special provisions are required for ITCs and VCTs to maintain the exemption for profits of a capital nature. These provisions are in CTA09/PT5/CH11.

CTA09/S395 provides that for ITCs, where profits or losses of creditor relationships are accounted for through the capital column of an income statement in accordance with the Statement of Recommended Practice (SORP) for ITCs issued by the Association of Investment Trust Companies (or would have been so accounted for if the SORP had been applied correctly), they are excluded in computing loan relationship debits and credits.

CTA09/S396 makes equivalent provision for VCTs.

The SORP is defined as the SORP issued in January 2003, ‘from time to time modified, amended or revised’; that is, it is the one currently in force for the accounting period.