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TAX PRIVILEGES
LIMITED CONTRIBUTIONS AND SUITABLE ASSETS There were two types of PEP:
Investments in a general PEP were limited to qualifying Collective Investment s. Qualification was previously defined as an investment that invested at least half of its assets in the UK and was later extended to the European Union . The qualification rule for existing PEPs was removed in 2001. Single company PEPs could be invested in shares in a single company. Additionally ''Windfall'' shares received by members from mutual bodies when they became listed companies could also register the holdings as a PEP. EROSION OF TAX PRIVILEGES From April 6th 1999, the Advanced Corporation Tax relief on share dividends received on a PEP was halved, partially ending their tax exempt status. From April 6th 2004 all relief on dividends was removed, although no additional tax on a higher rate is due where otherwise it might be. Gains on capital and all other forms of income such as cash interest and bond income remained tax free. Significant cash holdings for any length of time are discouraged by the Inland Revenue and the holdings in a PEP should be largely based on Shares or Corporate Bonds . PEPS REPLACEMENT Following the introduction of Individual Savings Account s on 6th April 1999 by the New Labour government, no new contributions could be made into PEPs. Existing funds retain their tax privileges and can be transferred to alternative managers. Furthermore the distinction between general and single company PEPs has been removed allowing more freedom of movement. |
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