LLM4260 - Corporate members: investment trusts
The first large corporate members were mainly linked to investment trusts. The investment trust supplied indirectly the capital that backed the corporate members. A qualifying investment trust is, generally speaking, exempt from tax on capital gains. To qualify, an investment trust has to meet certain conditions set out in ICAT88/S842. The use of investment trusts at Lloyd바카라 사이트™s has declined, largely because of the trend to form integrated Lloyd바카라 사이트™s vehicles (LLM1060), which led to difficulties in meeting the diversity conditions in section 842.
The 15% test
The Company Taxation Manual at CTM47000 onwards gives further details of the conditions in section 842 (LLM10000). Particularly significant is ICTA88/S842 (1)(b). This provides that the investment trust must not own a holding in a company that represents more than 15% by value of the investing company바카라 사이트™s investments.
Loans by group members
In arriving at this 15%, holdings in a number of companies in one group are aggregated (ICTA88/S842 (1A)(a)). Loans by group members must also be taken into account (ICTA88/S842 (1A)(b)). If a would-be investment trust is a member of a group, then any money owed to it by other members of the group is treated for the purposes of this test as a security, and therefore as part of the investment trust바카라 사이트™s holding in the companies owing the money.
Additions to holdings
The 15% test rule refers to the value of the holding at the time when the investment was acquired. However, any addition to the holding, which can include a loan, allows a recalculation at the time of the addition.