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Doubts over 'private' authorised unit trusts.

Wealthy investors have been warned about the long term viability of 'private' authorised unit trusts and open ended investment companies (OEICs).

Both are used by very high net wealth individuals to mitigate capital gains tax on investments, and are often created to invest a single family's wealth.

But following announcements in the Budget, tax experts now believe a question mark hangs over their future.

Stuart Skeffington, tax and trusts expert at law firm Withers, said that while the expected new rule denying the capital gains tax benefits of a UK authorised unit trust or OEIC for investors holding over 10 per cent had not materialised, there was still cause for concern.

However, following certain new powers unveiled in the Budget, measures seem likely to be introduced to provide for higher tax liabilities where investors hold a 'substantial' part of a qualifying investment scheme (QIS), he said.

A QIS is a non-retail authorised fund with a lighter-touch regulatory regime aimed at active investors.

'QISs can only be marketed to a 'sophisticated' investor - therefore, the Revenue clearly have their sights upon those with significant holdings in these sorts of funds,' Mr Skeffington said.

'The question is whether they will then turn their attention to authorised unit trusts and OEICs.

'It appears as if this may be a real possibility as the Revenue state that 'work will continue on the suitability of either a purposive test or other potential measures' in relation to other forms of collective investment.

'Therefore, there may still be a question mark over the long term viability of 'private' authorised unit trusts and OEICs.'
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Mar 26, 2005
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