IFM14282 | Taxation of investment trusts: Interest distributions: Introduction

The Investment Trusts (Dividends) (Optional Treatment as Interest Distributions) Regulations 2009 (SI2009/2034), made under the powers in FA09/S45, allow an investment trust with income from interest bearing and certain economically similar assets to treat all or part of a distribution as an interest distribution and receive a corresponding tax deduction.

This treatment applies to investment trusts and ‘prospective investment trusts’ (PITs) in order to allow (subject to certain conditions) a company that intends to seek approval from HMRC as an investment trust to make an interest distribution part way through an accounting period before it has made an application for approval.

The rules effectively move the point of taxation from the investment trust to its investors, for whom an interest distribution is treated as the receipt of a payment of interest.