§ Mr. Andrew MitchellTo ask the Chancellor of the Exchequer if he proposes any changes to the PEP regulations.
§ Mr. MaudeI have three changes to personal equity plans to propose.
839WFirst, I recognise that many people, particularly PEP managers, want to know how interest on cash deposited prior to investment will be dealt with when composite rate tax is abolished. I have decided that from 6 April 1991 such interest will not be liable to withholding tax under the new rules for the taxation of bank and building society interest. This interest will also be exempt from income tax at both basic and higher rates in the hands of investors, but only if it is eventually re-invested in the PEP. If it is withdrawn, it will be taxable in full. I hope that this news will be welcomed by plan managers who, I know, wish to start re-programming their systems in time for the change.
Secondly, shares may be described as "paired" where a United Kingdom and a foreign company have both agreed that no share in either company may be acquired other than as part of a unit comprising one share in each of the two companies, and units are offered for sale to the public in both companies at a broadly equivalent price. At present the PEP regulations do not allow such "paired shares" to be held within a PEP. I propose to bring paired shares within the definition of qualifying investments by analogy with the PEP rules for unit and investment trusts. The same maximum annual subscription of £3,000 will apply. Until the regulations can be amended, the Inland Revenue will operate the new rule by extra-statutory concession.
Shares subscribed for in a new issue may be transferred into a PEP up to 30 days from their allocation. Experience of this rule in practice has shown that it allows very little time for the necessary action to be taken. I therefore propose to increase the period to six weeks. Again, until the regulations can be amended, the Inland Revenue will apply the new rule by concession.