Analysts see bright future for split capital investments

Private banking wealth management clients’ options in the future 50p income tax regime have been discussed in a new report, out late yesterday.

The Association of Investment Companies (AIC) published analysis on split capital investment companies, which offer zero-dividend shares.

Owning these stocks could prove advantageous for high-end investors who will be hit by next year’s income tax hike.

The government announced in April’s Budget that people earning over £150,000 a year will be paying 50p in the pound, rather than 40p, from April 2010.

However the ’zero’ stocks are subject to capital gains tax rather than income tax - meaning that investors who move more of their money into the split capital sector can gain greater tax efficiency.

Speaking to the AIC, John Newlands, head of investment companies research at Brewin Dolphin, gave his own prognosis for the sector.

’Top quality splits deserve a return to the spotlight. I for one hope that this happens,’ he said.

’Splits were invented in 1965 for the same reason that they should prevail today, whereby capital gains are more lightly taxed than income for certain types of investor. It would be quite wrong to consign split caps to history.’

Annabel Brodie-Smith, communications director at the AIC, added that split capital investments ’can be a very useful financial planning tool’.

Figures cited by the organisation suggest that the split capital investment company sector encompasses two per cent of the total market and has assets of around £2 billion. ADNFCR-2318-ID-19198259-ADNFCR