It occurred to me that my last two posts sit rather well together as the ACS / Tax transparent fund proposals might offer a route out of the deemed disposals regime and its inappropriate loss relief provisions. (See post of 13 May for the full rant).
This does not apply to co ownership structured tax transparent funds as these are within the deemed disposal legislation (see post of 9th May ) but for tax transparent funds that are set up as limited partnership TCGA 1992 section 212 does not apply. This would seem to square the circle; that is the commercial demand to pool funds to reduce costs but the fact that tax on realisation is a more appropriate CGT basis.
Of course there are problems.
Is the limited partnership structure viable for insurance companies (legal / regulatory issues?). I've no idea what the answer is to this.
The no gain / no loss provisions for transfers into tax transparent funds only apply where the co - ownership structure is adopted. Presumably transferring CGT assets into a limited partnership structure will be a realisation for capital gains tax purposes. In some circumstances this might make a transfer unappealing but the widespread existence of CGT losses might cushion the blow.
As limited partnership tax transparent funds are transparent for CGT the fund provider is going to need to have some pretty good CGT reporting mechanisms in place to give a life insurer the information to go into its tax computation.
Obviously the real answer is a full reform of the treatment of capital amounts (both CGT and loan relationships) in the I-E computation but I don't get the felling this is likely to happen any time soon.
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