Deemed loan relationships: investment funds and mutual arrangements: summary
Holdings in certain types of investment fund and mutual arrangements
Certain types of investment may not be ‘money debts’, or arise from lending money, or the return they provide may be described as a ‘dividend’ or a ‘bonus’ rather than as ‘interest’.
Special rules prevent a company avoiding the loan relationships rules where it holds debt securities through the intermediary of certain types of investment funds - open-ended investment companies (OEICs), unit trusts and offshore funds. In certain circumstances a company’s holdings in such types of fund are treated as creditor loan relationships. CFM43000 gives more detail.
Guidance on the taxation of OEICs, unit trusts and offshore funds is to be found in the Company Taxation Manual (CTM48000) and in the Savings and Investment Manual (SAIM6000).
Building societies and industrial and provident societies
CTA09/S498 brings dividends and interest payable by building societies into the loan relationships regime so far as they would not otherwise be within it. Guidance on the taxation of building societies is to be found in the Company Taxation Manual (CTM49000).
CTA09/S499 treats dividends, bonuses and other sums payable on shareholdings in industrial and provident societies, and in agricultural or fishing co-operatives, held for the purposes of a trade or for other purposes as if it were interest arising on a loan relationship held for that purpose. It does not treat the shares themselves as a loan relationship other than to allow dividends etc on shares held for the purposes of a trade to be treated as trading income.