Corporation Tax Act 2009 section 638

Venture capital trusts: profits or losses of a capital nature

Section 638 prevents venture capital trusts from bringing capital profits or losses on derivative contracts into account for corporation tax purposes under the derivative contracts rules.

• Capital profits or losses arising to a venture capital trust from derivative contracts cannot be recognised as taxable credits or allowable debits under the derivative contracts regime.
• Capital profits or losses are those recorded (or that would have been recorded) through the capital column of the income statement under the Statement of Recommended Practice for investment trusts.
• If a venture capital trust is not itself an investment trust, the test is whether the profits or losses would have been shown in the capital column had the trust been an investment trust applying the Statement of Recommended Practice correctly.
• The Treasury has the power to amend the definition of capital profits or losses by statutory order, specifically for venture capital trusts that prepare their accounts under international accounting standards.