Corporation Tax Act 2010 section 1161

The income retention condition: exceptions

Section 1161 sets out specific exceptions to the income retention condition (condition D) that investment trusts must normally satisfy, recognising situations where retaining more than the permitted amount of income is acceptable.

• The income retention condition (condition D) does not apply rigidly in all circumstances — certain exceptions are provided for investment trusts.
• Where an investment trust retains more income than normally permitted, it may still qualify if the retention falls within one of the recognised exceptions.
• These exceptions acknowledge that there can be legitimate reasons why an investment trust might need to hold back a greater proportion of its income in a given accounting period.
• The provisions originated from earlier legislation (section 842(2A), (2B) and (2C) of the Income and Corporation Taxes Act 1988) and were updated by Finance Act 2011.