Revenue chases forbidden fruits

Personal equity plan managers are being told by the Inland Revenue that they have until 5 April to pull their money out of emerging markets that are not on its list of recognised stock exchanges - or lose their tax privileges.

Funds will be required to sell shares to ensure their assets are less than 50 per cent invested in these non-recognised exchanges. Failure to do so will threaten their eligibility for capital gains tax relief. Individuals who opted for self- invested emerging market PEPs will also lose their tax breaks.

The Revenue has told Pepma, the 101-strong PEP managers' association, that it intends to collect CGT on gains made in the 1993/4 tax year on PEPs that breached the rules. In its letter to the association, the Revenue says it will be writing to all PEP plan managers and "no-one involved will escape unscathed".

In a separate move earlier this month, the Revenue reached a private deal with the Association of Unit Trusts and Investment Funds and the Association of Investment Trusts Companies (Autif) over their members' liability to CGT. Three AITC members are believed to have agreed to pay CGT worth more than £530,000 for 1993/4. A further seven Autif members paid £50,000 between them.

Philip Warland, director-general of Autif, stressed that tax payments would be made by PEP managers, not individual investors. He said: "The PEP allowance of individual investors was unaffected even though people were invested in funds that were technically not PEPpable."

The Revenue has now asked Pepma to help it to track down PEP managers who have breached the rules. Those most likely to be affected are private- client stockbrokers with self-select or advisory PEPs. Some could face CGT bills for thousands of pounds.

The tax liability arose because of confusion caused by a Revenue rule change in April 1993. This required PEP managers to divest from "non-qualifying" investments, including gilts and non-recognised stock exchanges.

Some managers assumed the approved list of securities markets was issued by their regulatory body, the Securities and Investments Board. It later emerged that the Revenue had its own list of recognised stock exchanges, which excluded four markets on the SIB list.

The four markets - Mexico, Malaysia, South Korea and Thailand - have attracted a significant proportion of the money that flowed into emerging market funds during the peak of the boom in those areas in 1992-93. Last October the Revenue finally recognised these four markets, but is sticking to its plans to claw back CGT arising from investments in them during 1993/4.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea