Consultation on investment trust companies: modernising the tax treatment

The tax rules relating to investment trust companies (ITCs) have remained largely unchanged since their introduction in 1965 and the industry has long been calling for their modernisation and simplification.  The inflexibility of the current rules has for some time been an important factor in the trend of investment companies domiciling outside the UK and this is a key area that HM Treasury's recently released Consultation Document seeks to address. It also attempts to move towards a levelling of the playing field in the UK between ITCs and their competitors in the authorised investment fund sector.

Importantly the Consultation Document proposes the removal of the requirement that an ITC's income is derived wholly or mainly from shares and securities. It also suggests the replacement of the current investment test which limits an ITC's holding in any one company to 15% of its total...