I propose to take Questions Nos. 276 and 328 together.
Under the gross roll-up regime, introduced in Finance Act 2000, investments are allowed to grow on a tax-free basis within the relevant fund or policy. Tax is generally payable only when there is a chargeable event. Finance Act 2006 introduced deemed disposal for all investments that benefit from the gross roll-up regime. This amendment was designed specifically to prevent the avoidance of tax by way of indefinite deferral of tax under the gross roll-up regime.
Data on the volume of retail investment that may have been diverted away from EU-domiciled Exchange Traded Funds (ETFs) and into non-EU domiciled funds, direct equity shareholdings, or other asset classes specifically to avoid the deemed disposal regime is not available.
I acknowledge the complexities associated with deemed disposal, but as articulated in the Funds Review report, changes to these rules require guardrails to protect the Exchequer and ensure that appropriate taxation is paid. A balance between supporting retail investment while retaining important and necessary anti-avoidance protections, taking account of potential Exchequer impacts is required. This is being considered as part of the work underway on the roadmap for the taxation of retail investment, which is also considering the recent Recommendation on Savings and Investment Accounts from the European Commission. The roadmap, which will set out the proposed next steps for the taxation of retail investment, will be published in the coming months.
