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The government often tries
to use the tax system to encourage particular actions by investors. For
example, ISAs and PEPs were seen as a way to encourage saving and to promote
an interest in equity investment, while VCTs and EIS schemes were a way to
assist smaller, entrepreneurial businesses that might otherwise fall into
the "funding gap". On the other hand, the government wants to limit the loss
of tax revenue, and not provide tax loopholes which can be exploited by rich
individuals. As a result, sometimes these schemes start life with complicated
terms and restrictions that can hamper their usefulness to private
investors, and often they are "adjusted" later to limit the benefits with
further complication of the regulations.
Another problem with these schemes is
that they are often devised to be mutual schemes run by insurance companies,
fund managers and investment trusts. The private investor loses control of
their money to "professionals", and in the case of PEPs and ISAs effectively
ends up with holdings in a nominee account, which is never ideal. High costs
also result, and this structure seems to be more to the advantage of the large institutions
than the investors, with much of the tax relief benefit effectively being
consumed by payment of fees.
Back in 1997, UKSA
proposed an alternative structure to give individuals more control, which is
covered in the following documents:
CGT_Account and CGT_Account_Letter.
UKSA also made a number
of submissions on the ISA regime when it was first proposed which are
covered in the following documents:
ISA_1st_Response_1997
ISA_2nd_Response_1998
ISA_3nd_Response_1998
ISA_4th_Response_1998
ISA_5th_Response_1998
For a comprehensive report on Venture Capital
Trusts (VCTs) and some guidelines formulated by UKSA for their management,
go the following page: VCTs. |
