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Tax bills loom as Perpetual closes offshore funds

Perpetual investors in five of its offshore funds are to be hit with potentially heavy tax bills when the funds are liquidated this summer, provoking IFA anger.

The funds, which are being wound up as part of the Invesco/Perpetual merger, have been marketed and principally used by IFAs to defer clients&#39 tax burdens.

Unlike onshore funds, which incur annual tax bills for UK-based investors, these roll-up funds usually defer tax on investment gains until the investor chooses to draw down from their investment.

If enough unitholders approve the liquidation at the funds&#39 general meeting in April, all UK-based investors in the funds will be forced to pay tax when the funds are wound up in May rather than when they had originally planned.

Pearson Jones director Nick Conyers says he put two clients into the funds three years ago.

He says: “Perpetual promoted these funds as an attractive way to defer tax for someone who is looking to the longer term.

“Now clients will have no choice whatsoever. Both my clients are higher-rate taxpayers who are going to be stuffed with a tax charge that otherwise would not have applied. It is a cavalier attitude.”

Perpetual says investors may be able to switch into the one remaining fund within the umbrella but says it is still unsure of the full tax implications of the liquidations.

Invesco International managing director of offshore sales Richard Thompson says: “We are keeping open at least one of the funds in the Jersey umbrella, the sterling bond fund, and we think that investors will be able to switch into that. It is slightly higher risk but it has had very good performance.”


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