The RENN Universal Growth Trust has uncovered an error that is expected to cause the loss of its investment trust status for the previous tax year.

The North American smaller companies investment trust said although there had been no financial loss, it would lose the status for the year to 31 March 2011.

In a market statement, the investment trust revealed it was fixing the breach and working with HM Revenue & Customs and advisers to regain investment trust status.

The breach was related to an exercise of warrants in Cover-All Technologies worth $170,000 in March that were de to expire.

The exercise of the warrants and share appreciation had taken its holding in the company to 17.51 per cent of total investments, above the 15 per cent limit permitted for investment trusts.

However, the trust stated that no corporation tax on capital gains was likely to arise as it had net realised losses last year.

It also does not anticipate any corporation tax on capital gains in the current accounting period.

'The board deeply regrets that this situation has arisen and is taking steps to ensure that the controls designed to prevent such an event are properly adhered to,' a market statement added.

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