SCHEDULES

SCHEDULE 25Loan relationships

Part 2Amendments of other enactments

The Taxes Act 1988

56Investment trusts

1

Section 842 is amended as follows.

2

In paragraph (a) of subsection (1) (income must be wholly or mainly eligible investment income)—

a

after “the company’s income” insert “ (as determined in accordance with subsection (1AB) below) ”; and

b

after “eligible investment income” insert “ (as so determined) ”.

3

In paragraph (e) of subsection (1) (company must not retain more than 15% of eligible investment income)—

a

for “more than” substitute “ an amount which is greater than ”; and

b

after “eligible investment income” insert “ (determined in accordance with subsection (1AB) below) ”.

4

After subsection (1AA) insert—

1AB

In determining for the purposes of paragraph (a) or (e) of subsection (1) above (and accordingly of subsection (2A)(b) below)—

a

the amount of a company’s income, or

b

the amount of income which a company derives from shares or securities,

the amounts to be brought into account under Chapter 2 of Part 4 of the Finance Act 1996 in respect of the company’s loan relationships shall be determined without reference to any debtor relationships of the company.