Govt consults on tax-transparent CISs

The government has taken a step towards creating tax-transparent collective investment schemes (CIS) within the UK.

The Undertakings for Collective Investments in Transferable Securities IV Directive (UCITS IV) of July 2011 created the ability for UCITS funds to establish master-feeder arrangements.

However, the Treasury said, in order to make these attractive to investors, the master fund must be tax-transparent, which is not possible under current legislation for UK-domiciled funds.

In a consultation launched yesterday, the Treasury called for industry views on the costs and benefits of allowing tax-transparent UK-domiciled collective invest CISs.

It asked how popular the vehicles are likely to be, and the tax and legal arrangements necessary.

"The main objective of introducing contractual schemes is to ensure that the UK is able to compete to win an appropriate share of European pooled funds as UK domiciled funds and to consolidate the UK's position as the largest asset management centre in Europe," the Treasury said in a statement.

The consultation opens up the prospect of European funds being cheaper and more easily-available to advisers.

Ben Seager-Scott, senior research analyst at Bestinvest, said the legislation would lead to a wider choice of investment opportunities for investors, should the consultation be successful.

Julie Patterson, director of authorised funds and tax at the Investment Management Association, said: "This is a positive start to the year for the UK fund industry.

"We look forward to engaging with the Treasury as part of the consultation and ensuring the new vehicle works for investors."

The consultation period closes on 19 March.