HMRC has rejected Gresham House’s application for investment trust status for the year ended 31 December 2012. GHE intends to appeal but says it does not have any liability to corporation tax or capital gains for that period.
QD comment: this is all a bit technical but failing to get investment trust status can be very bad news. Failure to pass the tests that determine whether you are an investment trust mean that you are taxed as an ordinary company – so subject to capital gains tax and corporation tax. The rules were relaxed in December 2011 and now to qualify an investment trust must (a) invest in shares, land or other assets with the aim of spreading investment risk, (b) the company’s shares must be admitted to trading on a regulated market and (c) it cannot be a Venture Capital Trust or a Real Estate Investment Trust (as these types of companies are covered by other rules). Additionally:
- the company cannot be a “close company” – that is to say that at least 35% of the voting shares must be held by the public
- the company must distribute the majority of its income and not retain any more than 15% of it (the old rules said the maximum retention was 15% of income from shares and securities) – there’s a minimum threshold of £30,000.
- the company has to notify changes of investment policy to HMRC