Citation, commencement and effect

1. —(1) This Order may be cited as the Investment Trusts and Venture Capital Trusts (Definition of Capital Profits, Gains or Losses) Order 2006, and shall come into force on 18th May 2006.

(2) This Order has effect for accounting periods beginning on or after 1st January 2006.

Scope of this Order

2. —(1) This Order applies for the purposes of the specified provisions—

(a) in the case of an investment trust that prepares accounts in accordance with international accounting standards, and

(b) in the case of a venture capital trust that prepares accounts in accordance with international accounting standards.

(2) In this Order “the specified provisions” means—

(a) paragraph 1A of Schedule 10 to the Finance Act 1996(loan relationships: investment trusts: capital profits, gains or losses);

(b) paragraph 1B of Schedule 10 to the Finance Act 1996(loan relationships: venture capital trusts: capital profits, gains or losses);

(c) paragraph 38 of Schedule 26 to the Finance Act 2002(derivative contracts: investment trusts: capital profits, gains or losses); and

(d) paragraph 38A of Schedule 26 to the Finance Act 2002(derivative contracts: venture capital trusts: capital profits, gains or losses).

Meaning of “capital profits, gains or losses”

3. —(1) For the purposes of the specified provisions “capital profits, gains or losses” means profits, gains or losses where the circumstances fall within Case A, B or C.

(2) Case A is where, in the case of an investment trust or a venture capital trust, the profits, gains or losses are accounted for through the capital column of the income statement in accordance with the Statement of Recommended Practice.

(3) Case B is where, in the case of an investment trust, the profits, gains or losses would have been accounted for through the capital column of the income statement if the Statement of Recommended Practice had been applied correctly.

(4) Case C is where, in the case of a venture capital trust, the profits, gains or losses would have been accounted for through the capital column of the income statement if the venture capital trust had been an investment trust and the Statement of Recommended Practice had been applied correctly.

(5) For the purposes of this Order the Statement of Recommended Practice is, in relation to an accounting period for which it is required or permitted to be used—

(a) the Statement of Recommended Practice relating to the Financial Statements of Investment Trust Companies, issued by the Association of Investment Trust Companies in January 2003 and revised in December 2005, as from time to time modified, amended or revised, or

(b) any subsequent Statement of Recommended Practice relating to investment trusts, as from time to time modified, amended or revised.