Split Cap Compensation Payout Will Be Tax Free

by Robin Pilgrim, LawAndTax-News.com, London

21 March 2005

The UK's Inland Revenue announced last week that the majority of those affected by the collapse of several high profile split capital investment trusts in 2002 will be able to receive their share of the £194 million compensation fund tax free.

According to reports, the tax authority stated that the payouts could be made directly into the personal equity plan (PEP) or individual savings account (ISA) wrappers in which the investments had initially been purchased.

Speaking to Reuters, director general of the PEP and ISA Managers' Association, Tony Vine-Lott observed that:

"We think that this keeps with the spirit of the compensation which was designed to replenish the investment accounts of those who lost out due to the collapse of the split cap investment trust companies."

However, PIMA's technical director, Peter Shipp revealed that the Inland Revenue will not allow compensation paid into another ISA to benefit from the tax break, meaning that investors who have closed their initial ISA stand to lose out.

"Compensation will only be paid into the ISA in which the split cap investment was held at the time of the complaint. If they've sold the units before the trigger date or withdrawn from the ISA then the Revenue won't allow compensation to be paid into an ISA," he explained to Reuters.

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