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Finance Bill

It is reasonable to ask us to make the consequences quite clear. I do not believe that the hon. Gentleman’s concern is justified, but to prevent misunderstanding or the risk of misleading people, we must ensure that the regulations make it clear which circumstances apply. We will take note of his concerns when we make them. The hon. Gentleman said that more fund providers would sell funds in Dublin and Luxembourg, rather than in the UK, because of the rule and the instability of the regulation. The tax regime applicable to funds authorised by the Financial Services Authority will not be changed materially. Capital gains made within the fund remain exempt from corporation tax, and fund-level profits remain subject to corporation tax at the lower rate of income tax—currently 20 per cent. The income tax treatment of investors receiving distributions from both retail funds and qualified investor schemes will not change. Nor will the capital gains treatment of those individuals, unless they, together with their associates, hold a substantial proportion of a QIS. In those cases, any annual increase in the value of their holding will be charged to tax as income each year.