HC Deb 28 November 2002 vol 395 c460W
Mr. Cousins

To ask the Chancellor of the Exchequer what review he is undertaking of the capital gains tax consequences of different dividend reinvestment practices in unit trusts and OEICS. [83425]

Ruth Kelly

The taxation of dividend reinvestment in United Kingdom authorised unit trusts and open-ended investment companies is long established and well understood. Tax is payable on the distribution in the same way that it would be, were the dividend actually paid out. This means that for individuals, because of the tax credit rules, only higher-rate taxpayers have any additional tax to pay.

There is no capital gains tax, or corporation tax on chargeable gains, payable until investors dispose of their units or shares. And then investors can normally treat the reinvested dividends as part of their allowable expenditure in calculating the capital gains.

The Chancellor has asked the Inland Revenue to review the taxation of investment in similar overseas collective investment schemes. He emphasised in the Pre Budget Report that the Government are committed to continuing constructive dialogue with fund managers and other stakeholders on the implementation of a new regime. In taking that work forward, the Government will listen carefully to all views. A key objective is to ensure that the competitiveness of the UK fund management industry is preserved without distorting the market for savings and investment products as a whole.

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