The Association of Investment Companies has welcomed the announcement that the UK government intends to review the tax legislation for investment trust companies with a view to modernising the rules.
The government will issue a consultation document in summer 2010.
Ian Sayers, director general of the AIC, says: “The tax rules for investment trusts have been in place since 1965 and are beginning to show their age. We believe the reform of these rules will provide more flexibility for member companies and reduced costs for consumers. As these changes should be tax neutral we are optimistic any future government would wish to take them forward. “
The government also announced its intention to work with the VCT sector to examine the evidence for adjusting the rules governing VCT investment.
Sayers says: “Removing restrictions on where VCTs can invest would make it easier for the sector to support smaller and growing businesses in the UK. This would be timely as the withdrawal of banks from small business lending have increased the range of companies which are unable to secure development capital from traditional sources – a problem which VCTs are designed to address. To make changes to the scheme the UK will have to convince the European State Aid authorities that reforms are merited and these moves to gather evidence are a vital first step in this process. We look forward to working with the Treasury to develop the evidence base to make these reforms happen.”