Investment trusts: draft HMRC guidance on the new rules

HMRC has published draft guidance on the new definition of “investment trust” and the approval provisions. This is to be included in HMRC’s Company Taxation Manual and comments are invited by 1 June 2012.

For the most part, the draft guidance merely follows the legislative provisions. However, it:

• states that HMRC will accept listing under Chapter 15 of the UK Listing Rules as indicating that an investment trust aims to spread investment risk unless, exceptionally, the evidence suggests otherwise: if an investment trust is not listed, it should consider whether it would meet the Chapter 15 requirements and HMRC will apply a similar approach;
• states that, for the purpose of the income distribution requirement “income” means gross income before deducting tax and management expenses; and
• provides some examples, including how the income distribution requirement applies to investment in offshore reporting funds.