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HMRC internal manual

Corporate Finance Manual

Derivative contracts: special kinds of companies: investment and venture capital trusts

Investment and venture capital trusts: profits or losses of a capital nature

Investment Trust Companies (ITCs) and Venture Capital Trusts (VCTs) are UK resident companies subject to corporation tax, but both are exempt from corporation tax on chargeable gains (TCGA 92/S100(1)).

For most companies, the derivative contracts regime results in all profits and losses from derivative contracts coming into the corporation tax computation. Accordingly, special provisions are needed for ITCs and VCTs to maintain the exemption of capital profits. Profits or losses of a capital nature arising to an investment trust or a venture capital trust from a derivative contract are, therefore, not brought into account in determining derivative contract credits or debits (CTA09/S637(1) & 638(1)).

‘Profits or losses of a capital nature’ are defined under S637(2) and S638(2) for investment trust and venture capital trusts, respectively.