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IPTM7750 | Personal portfolio bonds (PPB): permitted property: investment trust companies ITTOIA05/S520

From HM Revenue & Customs · Insurance Policyholder Taxation Manual

Investment trust companies (category 3)

Shares held in an approved investment trust company count as property that may be selected by the holder of a policy under its terms without making it a PPB. In order to be approved by HMRC, investment trust companies must satisfy the conditions in ICTA88/S842.

Approval of investment trust companies is given annually so it is possible that an investment trust company that was previously approved may cease to be approved. Where shares in such a company have been selected as property determining benefits under the policy, the link between the value of the shares and the policy benefits must be broken to keep the policy outside the definition of a PPB. This should be done as soon as reasonably possible after the loss of approval.

An agreement between the insurer and the policyholder, even if not in writing, to retain the link between policy benefits and the value of the shares of the unapproved investment trust company would amount to a variation of the terms of the policy. This variation would allow selection of property that is not in any of the permitted categories so the policy would become a PPB.

Overseas equivalent of an investment trust company

An overseas equivalent of an investment trust for the purposes of the PPB legislation must meet the following conditions:

  1. Must not be a close company (applying CTA10/PT10 as if the company was a UK company) at any time in an accounting period.

  2. All, or substantially all, of the business of the company is investing its funds in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds. In terms of investing its funds the company may be self-managed or may appoint an investment manager. In either case members of the company should not be involved in day to day decisions on investing funds.

  3. The shares making up the company’s ordinary share capital (or, if there are such shares of more than one class, those of each class) are admitted to trading on a regulated market.

‘Regulated market’ has the same meaning as in Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments (see Article 4.1.21).

‘Investment manager’ means a person who provides investment management services.