View more on these topics

Take a holiday from the taxman

Capital gains tax is widely regarded as one of the most complicated (and

unfair) taxes levied on UK investors.

The previous system of indexation allowances and pre- and post-March 1982

asset “pools” could confound all but the most gifted mathematicians,

especially if your clients held equities that were subject to rights or

scrip issues.

The latest so-called simplification to the CGT system is the introduction

of taper relief. This system reduces the tax paid on capital gains

depending on how long an asset is held. However, for assets held before

April 6, 1998, CGT calculations will have to use bothsystems to establish

the tax liability.

The latest system now includes two forms of taper relief – one for

personal assets and one for business assets. The 2000 Budget has introduced

the following changes for UK investors:

1.4 per cent increase in annual allowance (£7,200for 2000/01), lower

than the rate of inflation.

10 per cent rate of tax introduced for capital gains,consistent with

changes to savings income.

Business asset taper relief reduced from 10 tofour years.

Reclassification of certain shares held in companiesas business assets

(especially for SAYE and executive share-option schemes).

If all this seems rather involved, don&#39t worry, there is more to come.

With self-assessment, it is now incumbent on your clients to ensure they

have calculated their capital gains tax correctly and not fallen foul of

the regulations, making sure they do not miss the deadlines for payment.

In addition, the Inland Revenue has done away with the practice of bed and


If you are still not put off, your clients should ensure they seek

appropriate advice from you, their financial adviser, and possibly from an

accountant while making sure they keep a record of each purchase, sale,

dividend or income payment and, indeed, anything else that happens with

their assets. This will ensure they can account for everything to the

Inland Revenue, especially now self-assessment is fully operational and the

Revenue has more time to look into private investors&#39 tax affairs.

Is there another option?

A simpler, more tax-efficient solution for you and your clients may be an

offshore portfolio bond.

There is no CGT to pay on gains within the bond and when the bond is

encashed any gains are accounted for inyour clients&#39 income tax


Is this too good to be true? No, you can change the split and spread of

your collective investments within a portfolio bond without triggering a

capital gains tax charge.

Additionally, the favourable treatment of the portfolio bond means that

your clients can withdraw up to 5 per cent of their initial investment each

year with no further tax to pay for at least 20 years and, in some cases,

with appropriate tax and trust planning, this could bedeferred


Give your savings a holiday from the taxman.

Given the choice, would your clients rather pay tax now, or have the

benefit of their entire investment growing with the aim of enhancing their

future returns? Many people when faced with this question would rather wait

until they absolutely had to before paying tax.

Tax could be deferred until your client retires, perhaps becoming a

basic-rate taxpayer. They may choose to move abroad (either permanently or

temporarily) when they retire and they may become subject to a different

andpossibly more favourable tax regime.


Standard Life Bank&#39s futureperfect good for £61m

Standard Life Bank has announced it has approved £61m in loans through its new Futureperfect mortgage product in the first two days it has been available. The product offers a guaranteed 6.25 per cent capped rate for the entire 25 year lifespan. It is the first product of its kind, and the industry has received […]

Young seek friends&#39 advice ahead of IFAs

IFAs are in for a rude awakening as a new survey reveals youngprofessionals would rather seek advice from friends and relatives than goto a professional adviser.The survey, conducted by software company Focus Solutions Group onfinancial services and new channels to the market, highlights somedisturbing trends among young professionals aged between 25 and 35.The company says […]

GEB ready to rumble

The strong performance of markets over the last few years has lulled manyinvestors into regarding equity investments and in particular index trackerfunds, as a safe bet. However, recent turbulence in the market and thefall of some dotcoms from grace has begun to wear away at investorconfidence in direct equities and investors have begun to look […]

Misys networks to recruit Colonial salesforce

Misys networks Kestrel and IFA Network plan to recruit 350 of the Colonialsalesforce franchisees left jobless after Winterthur&#39s takeover ofColonial Life.If all 350 are recruited, the number of registered individuals in theMisys stable would rise to nearly 5,000.The networks say they were inundated with calls from the franchiseesinterested in joining following the £332m takeover of […]

Global income: preparing for a rate rise…

In the five years since we launched the Artemis Global Income Fund, its manager Jacob de Tusch-Lec has built a distinctive portfolio that is first among its peers. Here he explains why his “quality, cyclical and value yield” stocks, and flexible approach, leave the fund better placed to benefit from uncertainty than funds that depend […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment