Investment company

[mpat89]

Hi all - something I've been wondering about.

How does HMRC treat a company whose only activity is to hold listed shares?

In my head there are two potential scenarios:

1) The shares are treated as capital investments so:
- dividends received as treated as dividend income (and hence most probably exempt from corp tax)
- capital gain/loss on disposal treated as chargeable gain

2) The shares are treated as the company's trade, so all dividends received and price movements of the shares in the tax period will be taxed as trading income

Which one will be the case? The background here is these investments will be held to provide a pot for shareholders when they are unable to work.

[bd6759]

If the "activity" is simply holding shares, it is an investment company, and the assets are investments.

If the activity is buying and selling shares, it could be trading, but nonetheless dividends will still not be taxable.