View more on these topics

AIC wins concessions in HMRC’s investment trust tax reforms

HM Revenue & Customers has revised its plans to reform the tax rules for investment trusts, following lobbying by the Association of Investment Companies.

The Government announced plans to modernise the tax rules for investment trusts in its Budget 2010 in June, after acknowledging they were written in 1965 and left largely unchanged. In July it issued a consultation on the plans.

In a summary of responses, published this morning, HMRC says the industry has been “generally very supportive” but the AIC was “strongly against” some proposals.

These included plans to reduce the amount of investment income the trusts can retain, to build up reserves for future times when income levels are lower, from 15 per cent to 10 per cent.

HMRC says in light of the AIC’s responses the trusts “should continue to be able to retain up to 15 per cent of their income, measured by reference to total income rather than income from shares and securities”.

HMRC has also dropped plans to change its tax treatment around the “close company test”, where the trusts cannot be controlled by fewer than five shareholders.

The reforms will still include measures that were welcomed by the AIC, including the removal of tax restrictions on how the trusts invest in other companies. These will be replaced with new risk tests.

HMRC will also deliver clarity over which transactions are treated as investments for tax purposes, remove annual approval processes for trust directors and remove the “cliff edge problem” in certain taxes.

The Government is set to publish the reforms in its Finance Bill in Spring 2011.

Financial secretary to the Treasury Mark Hoban says: “I am pleased that so many interested parties have engaged actively with us in this process to date, both in written responses to the consultation document and in meetings with officials.”

AIC director general Ian Sayers [pictured] says: “The Government has listened carefully to the industry’s concerns and adjusted its approach to avoid causing potential problems for the sector. This paves the way for legislation which will deliver significant benefits for investment trusts. It will increase their commercial flexibility and give them the capacity to develop into new areas of investment.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com