Tax change set to boost investment trust demand

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Tax change set to boost investment trust demand

Changes to the tax treatment of investment trusts is likely to boost demand for the vehicle, according to Ian Sayers, director general of the Association of Investment Companies (AIC).

The new rules mean that trusts registered in offshore jurisdictions will be permitted to be held in insurance wrappers in the UK in a tax efficient way.

Previously, life insurance, capital redemption policies and annuity contracts that wanted to hold investment trusts not listed on the UK stock market would have had the gains from those assets taxed as the assets were treated as a personal portfolio bond.

Previously UK domiciled investment trusts could be held in those wrappers, but a rule change that took effect from 1 January means trusts registered in other countries, but listed on the main market of the London Stock Exchange, can now be held in those wrappers.

Mr Sayers said: "This change was a priority for the industry, so it is very pleasing to see it become a reality.  

"Advisers and wealth managers have indicated that they would like to be able to access non-UK investment companies and UK Reits via these wrappers to help diversify their client portfolios and take advantage of investment companies’ strong performance and income opportunities.

"This change could potentially open up a significant source of demand for these companies."

The news comes in the context of 2017 being a record year for investment trust purchases by investment advisers.

Data from the Association of Investment Companies (AIC) showed that £745m was deployed by investment advisers into investment trust shares in the first nine months of 2017, surpassing the £671m invested in those shares in the whole of 2016, and the £698m deployed in 2015, which had been the record year.

david.thorpe@ft.com