Tax efficient investments

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Tax efficient investments
  • Overview
  • Investments with tax exempt income or gains
  • Investments that provide tax relief
  • Action to take before the tax year end

Overview

Tax efficient investments provide the investor with relief from one or more taxes for the current tax year, or are exempt from income tax and / or capital gains tax. Some investments have both attributes.

Each type of investment has its own set of qualifying conditions, which generally includes a cap on the amount that can be invested in a particular period. This may be the tax year, or another period. The client’s holding of tax efficient investments needs to be considered as part of the tax year end planning exercise, to achieve tax savings for the current year and potentially to manage the taxable income for future periods.

Regulated investment advice

Investment advice is a regulated activity under the Financial Services and Markets Act 2000 (as amended by the Financial Services Act 2012). This covers advising on buying, selling or subscribing for a particular investment.

Outlining the broad tax implications of the different categories of investments, such as enterprise investment scheme (EIS) shares or individual savings accounts (ISAs) is not a regulated activity. However, if you were to advise your client to take out these investments or, for instance, partially surrender his non-qualifying life insurance policy, this would be a regulated activity.

To carry on a regulated activity, you must either be an authorised person under FSMA 2000 (as amended by FSA 2012), or your communication with the client must be approved by an authorised person. The regulator is the Financial Conduct Authority. You can find out more information on the FCA website .

See also the Regulated investment advice guidance note.

Know your client

Several of the tax efficient investments discussed in this guidance note can only be acquired by individuals who are resident in the UK for tax purposes. If the client leaves the UK, the investment may lose its tax-exempt status. See the Residence ― overview

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