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Investment companies—overview

D7.301 Definition of an investment company

Determining the nature of the activities undertaken by a company is important in assessing how its income is to be taxed (trading income or non-trade loan relationship credits for instance) and whether its expenses are deductible (eg trading expenses, management expenses or non-trade loan relationship debits). There are two distinct types of company which are commonly described as investment companies.

One is a company whose activities consist mainly in the holding of investments and the receipt of income from them. This category usually includes investment trusts (although this has a special meaning for tax purposes, see D7.332) and holding companies.

The other is a company which carries on the business of buying and selling investments with a view to making a profit from such dealing and whose receipt of income from the investments is incidental to the main business. Such companies are often called investment dealing companies (see D7.330–D7.331).