Comparisons

Question 1

Investment Trusts (ie REITs) also VCT very similar

Answer 1

Closed ended (fixed number shares)
Listed on stock exchange
Priced by supply and demand
Lower charges than OEICs
Different share classes
Can gear significantly
More specialised than OEICs

Question 2

Unit Trusts/OEICs

Answer 2

Open ended (think OEIC, OE stands for Open ended)
Priced to NAV (not supply & demand)
Higher charges than IT
One share class
Gearing capped at 10%
Mainstream investments

Question 3

Offshore Reporting funds

Answer 3

Distribute min 85% of income
Income declared to HMRC, so they allow it to be treated same as UK divs/Int
investor taxed as income arises
Any gains on disposal subject to CGT can use exemption same as UK funds

Question 4

Offshore funds - non-reporting funds

Answer 4

Mainly roll up funds as they don’t distribute income
As HMRC don’t know about the income they don’t allow you to use UK tax rules
When dispose of fund, calculate gain using cgt principals but the gain is then taxed as income ie 20%, 40%, 45% rather than cgt rates
PSA available
So a HRT worse off in non reporting fund as tax on gain 40% whereas reporting fund would only be 20% (CGT rate) and would only be taxed on amount above exemption

Question 5

REIT

Answer 5

Type of investment Trust
Closed ended (AIM)
Own shares in a product that invests in property rather than direct into property.
Provides a liquid market in property with taxation similar to direct
Min £5000 much less than you would need to invest directly in proportion
Adds diversification

Question 6

Property Authorised Investment property PAIF

Answer 6

Structured as an OEIC so open ended
Investor owns shares in a product that invests in property
Structured like REIT but open ended
Also contains 3rd cash element to aid liquidity (20-30% likely to be in cash)
Ring fenced 60% in property (75% in REIT)
No corporate investor can hold more than 10%
Taxed the same as REIT on ring fenced and non ring fenced
Cash element, interest paid gross
Corporation tax as usual
Investor can use PSA etc

Question 7

ETFs

Answer 7

Open ended index tracking fund
Real time pricing like other shares
More transparent than funds
Gives exposure to specific markets
Divs payable if underlying securities pay them
Cheaper than other collective passive manager funds
Exempt from stamp duty
Either physical (owns asset it tracks) or synthetic (using derivatives)

Question 8

VCTs (Structured like Investment Trusts)

Answer 8

Min £200k
Tax relief if hold for 5 years (V)
No reinvestment relief
Tax free dividends
Tax free capital gains
Income tax relief 30%
No carry back
No business relief

Question 9

EIS

Answer 9

Min £1m or £2m knowledge intensive
Carry back to last tax year
30% tax relief if held for 3 years
Dividends are taxed
Tax free capital gains after 3 years
Business Relief
Reinvestment relief

Question 10

SEIS

Answer 10

Min £100k
Carry back to last year
50% income tax relief if held for 3 years
Dividends are taxed
Tax free capital gains after 3 years
Business relief
50% reinvestment gain exempt