Introduction Background Note
6.Investment trust companies (ITCs) are pooled, risk-spreading investment vehicles constituted as limited liability companies. They are publicly listed and invest in a diversified portfolio of shares and other securities with the aim of providing a return to their shareholders.
7.There are special rules that define an ITC as an investment trust for tax purposes under section 842 of ICTA, which if met, allow the company to receive an exemption from corporation tax on their chargeable gains.
8.The current tax treatment for investment trusts that invest in interest bearing assets is that such income is chargeable to corporation tax. The section provides for regulations to be introduced that will allow investment trusts or prospective investment trusts to receive a tax deduction for the interest distribution that they make to their shareholders. This will then enable them to invest in interest producing assets tax efficiently.
9.The new tax treatment for investment trusts or prospective investment trusts moves the point of taxation for income received from interest bearing assets from the investment trust to the shareholder, with the result that shareholders face broadly the same tax treatment as they would have faced had they owned the interest bearing asset directly.