Corporation Tax Act 2009 section 490

Holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights

Section 490 sets out when a company's holdings in open-ended investment companies, unit trust schemes or offshore funds must be treated as creditor relationships and taxed under the loan relationships rules using fair value accounting.

• Where a company holds shares in an OEIC, rights under a unit trust scheme, or an interest in an offshore fund, and the fund fails the qualifying investments test at any point during the accounting period, the holding is treated as a creditor relationship
• Any distributions received in respect of such a holding are stripped of their status as distributions and instead brought into account as loan relationship credits under Part 5 of the Act
• All credits and debits arising from the holding must be calculated on a fair value accounting basis for the accounting period in question
• Investment bond arrangements and holdings in offshore funds where the fund's income is already treated as the company's own income are excluded from these rules