Taxation
Provided that it is approved by HM Revenue & Customs, an investment trust is taxed in the normal way on its investment income, but its capital gains are not taxed. This avoids the double taxation which would otherwise arise when shareholders sell their shares in the investment trust and are taxed on their gains.
An approved investment trust must
- be resident in the United Kingdom
- derive most of its income from investments
- distribute at least 85% of its investment income as dividends (unless prohibited by company law)
The company must not hold more than 15% of its investments in any single company (except another investment trust); must not be empowered to distribute capital gains as dividends to shareholders, and must not be a closed company.
Read more about this topic: Investment Trust
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—Andrew Jackson (1767–1845)