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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Deemed loan relationships: holdings in investment funds: relevant holding

Relevant holding

CTA09/S490 applies where a company has a ‘relevant holding’ and the scheme fails the ‘qualifying investment’ test (CFM43040).

A relevant holding is:

  • any rights under a unit trust scheme (this includes both authorised and unauthorised unit trust schemes)
  • any shares in an OEIC (that is an OEIC incorporated in the UK), or
  • any ‘material interest’ in an offshore fund (as defined in ICTA88/S756A to 756C up to 1 December 2009, and FA08/S40A from 1 December 2009).

Where, at any time in the company’s accounting period, the unit trust, company or fund fails to meet the qualifying investments test, gains and losses reflected in the increased value of the underlying units or shares will be brought into charge on the company as loan relationship debits and credits (CFM43050).

Since an OEIC is a company and an AUT is treated as a company for corporation tax purposes either entity could also be subject to CTA09/S490 in respect of its own holdings in other unit trusts, offshore funds or OEICs. However where under its applicable accounting standard capital profits, gains or losses have been capitalised, debits and credits properly taken to capital are excluded. The operation of S490 in such a case is broadly to put the AUT/OEIC in a similar position as if it had invested directly in the underlying loan relationships.