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Draft guidance has been published by HMRC relating to investment trusts that are limited companies with a fixed capital structure incorporated under company law.
The guidance explains a new optional tax framework for investment trusts investing in interest bearing assets.
The regulations in SI 2009/2034, made under the powers in FA 2009, s 45, allow an investment trust with income from interest bearing and certain economically similar assets to receive a tax deduction for any interest distributions made, effectively removing any corporation tax liability that would otherwise arise on interest and similar income.
The point of taxation is moved from the investment trust to the investor so that he is treated as if he had received income directly from an investment in the underlying assets.
The draft guidance on the new optional tax framework will be inserted into HMRC’s Company Taxation Manual at CTM47500.
Comments on the draft guidance should be sent by 16 October 2009 via email.
