Other Measures Announced

• Funding bonds
• Offshore funds: new tax regime
• Property authorised investment funds
• Other Budget announcements not covered by this Budget Report

Funding bonds

Currently the law does not deal with how a repayment claim in respect of tax treated as paid to HM Revenue and Customs by a funding bond should be handled.

In practice, HM Revenue and Customs has satisfied the repayment claim using a funding bond where this has been feasible. The Finance Bill will provide rules to confirm that HM Revenue and Customs can satisfy such repayment claims by using all or part of the funding bonds used to pay the tax deducted. The legislation will allow HM Revenue and Customs to request that the bond issuer divides, if necessary, any funding bond held by HM Revenue and Customs so that the repayment claim can be satisfied using part of the funding bond. This will affect funding bonds issued on or after 12 March 2008.

Offshore funds: new tax regime

At a date to be announced by the Treasury the Budget announced that legislation will be introduced to provide powers to make regulations dealing with the taxation of investors in offshore funds and the rules for allowing certain funds to be classified as 'reporting funds'. This change will affect managers of, and investors in, overseas based funds such as open-ended investment companies and unit trust schemes. For these purposes, an 'offshore fund' is any type of fund that is resident outside the UK or established under foreign law and would, if it were established in the UK, constitute a collective investment scheme for the purposes of the Financial Services and Markets Act 2000.

Property authorised investment funds

From 6 April 2008 changes commence that affect Authorised Investment Funds (AIFs) that invest mainly in property, UK Real Estate Investment Trusts (UK-REITS) or similar companies and investors in AIFs that enter the Property AIF tax regime. These changes will introduce a tax regime for investment into real property and certain property companies, which will enable certain AIFs to elect for a tax treatment that will move the point of taxation for the fund to its investors. The new regulations will enable a Property AIF to provide an open-ended fund alternative to the existing closed-ended REITS.

Other Budget announcements not covered by this Budget Report

• Life insurance companies: consultation outcomes and simplification (BN36)
• Life insurance companies: interest apportionment (BN37)
• Insurance premium tax (IPT): changes relating to overseas insurers (BN38)