IFM14560 - Consequences of breaches

Consequences of minor breaches

An investment trust that is in minor breach of the regulations will continue to be treated as approved unless the breach is regarded as a serious breach as a result of multiple minor breaches; see IFM14540 for details of when that will be the case.

Consequences of serious breaches – regulation 29

When a serious breach arises (see IFM14536) under the regulations (SI 2011/2999) and HMRC give notice of the serious breach to the company, then it will be treated as a company that has not been approved as an investment trust from the start of the accounting period during which the serious breach occurred (or if there is more than one serious breach, the first of them) and for all subsequent accounting periods.

This clearly assumes that the company will have notified HMRC of all breaches of the regulations, as required by regulation 24, or that HMRC will have discovered that the company is in serious breach as a consequence of an enquiry or through some other means. Note that there is no time limit for the giving of a notice by HMRC, and therefore if an investment trust fails to notify a breach that may be regarded as a serious breach then approval may be withdrawn with retrospective effect back to the start of the accounting period during which the serious breach occurred (or if there is more than one serious breach, the first of them) and for all subsequent accounting periods, subject to normal assessing time limits.

Consequences of breaches of the eligibility conditions at CTA10/S1158 – regulation 30

A company which has been approved as an investment trust will cease to be so approved for the accounting period in which there is a breach of any of the eligibility conditions and for all subsequent accounting periods unless the company makes an application for approval for a later accounting period. See regulation 30 of SI 2011/2999.