(1)In the Tax Acts “investment trust” means, as respects any accounting period, a company which is not a close company and which is approved for the purposes of this section for that accounting period by the Board, and the Board shall not approve any company unless it is shown to their satisfaction—
(a)that the company’s income is derived wholly or mainly from shares or securities; and
(b)subject to subsection (2) below, that no holding in a company, other than an investment trust or a company which would qualify as an investment trust but for paragraph (c) below, represents more than 15 per cent. by value of the investing company’s investments; and
(c)that the shares or securities of the company are quoted on the Stock Exchange; and
(d)that the distribution as dividend of surpluses arising from the realisation of investments is prohibited by the company’s memorandum or articles of association; and
(e)that the company does not retain in respect of any accounting period more than 15 per cent. of the income it derives from shares and securities.
(2)Subsection (1)(b) above shall not apply—
(a)to a holding in a company acquired before 6th April 1965 which on that date represented not more than 25 per cent. by value of the investing company’s investments; or
(b)to a holding in a company which, when it was acquired, represented not more than 15 per cent. by value of the investing company’s investments;
so long as no addition is made to the holding.
(3)For the purposes of subsection (2) above—
(a)“holding” means the shares or securities (whether of one class or more than one class) held in any one company; and
(b)an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition or latest addition is made to the holding; and
(c)where in connection with a scheme of reconstruction or amalgamation, a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding.
(4)In this section “company” and “shares” shall be construed in accordance with sections 64, 93 and 155(1) of the 1979 Act.