11:49 Fri 29 Jan 2010
Investment trusts planning early divis to avoid tax hike
Investment trusts with a focus on income payments are likely to be among those bringing forward dividends to help investors avoid the new 50% tax band which comes into force in April.
At least a dozen companies have either already announced special dividends or brought payments forward in order to help investors avoid the change. Citywire understands a wide range of investment trust boards are also currently discussing following them in the move.
Few boards have yet made public announcements on the move as they weigh the benefits of bringing payments forward so as to help higher rate tax payers against the marginal impact of pushing some basic rate taxpayer investors into the 40% band by the move.
However, Citywire has learned that income-focused trust Law Debenture is likely to bring its Spring dividend forward and brokers have acknowledged they have been in discussions with a wide range of trusts.
Among the largest groups to make the move are those with significant director shareholdings, such as Hiscox were founder Robert Hiscox has a major stake.
Also on the list is Compass Group, Shaftesbury Group, Land Securities and Halstead.
James Henderson, manager of Lowland Investment Trust, said the move is likely to be made predominately by trusts with a year end in December. 'It only really suits December year end companies because often its just a case of bringing a dividend forward by a few days.'
Henderson argues that income-focused investment trusts will look at it too and points out that it highlights the current dilemma for investors as the big difference between capital growth and income tax forces them away from straightforward dividend income vehicles.
'I think it is going to be a very tough time for income trusts. I imagine the position will have to change probably with capital coming up to meet income,' he said.
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