§ Mr. PawseyTo ask the Chancellor of the Exchequer what is the tax position of investors in school fee payment plans with education trusts whose charitable status has recently been under review. [1185]
§ Mr. JackThe Inland Revenue has decided that, because of advice it gave in the past about the tax treatment of investors in these plans, it will not collect tax on payments made under plans in existence on 20 June 1996. This is subject to the proviso that plans are not changed to increase the benefits which would be payable or replaced by new plans, for example, to provide benefits for a different child.
In principle, investors will be liable to tax on a proportion of any profits made from the school fee payment schemes. However, the educational trusts aim to eliminate any tax charge by ensuring that any profits are donated to charity. If a tax charge were to arise, tax legislation gives investors the right to recover any tax payable from the scheme.
This means that the position of people who have invested in these schemes in the past will be safeguarded and they should not be faced with unexpected tax liabilities. I welcome the Revenue's decision and am satisfied with the protection it provides for existing investors.