IA rolls out new tax cutting charities vehicle

Added 12th October 2016

The Investment Association has partnered with the Charity Investors Group and Charity Law Association to create a new charity fund that could save charities a substantial amount in VAT costs.

IA rolls out new tax cutting charities vehicle

The newly unveiled Charity Authorised Investment Fund (CAIF) will offer the same benefits as the existing unauthorised version of the vehicle, the Common Investment Fund (CIF), including the ability to smooth income levels over multiple years, the IA confirmed. 

Around 13,000 charities are currently invested in Common Investment Funds, which cumulatively hold close to £12.3bn in assets. 

As the CAIF’s name suggests, it is authorised and regulated by the Financial Conduct Authority, offering further protection for investor charities, the majority of whom are retail investors. The new fund will only be open to investment from charities.

But one of the structure’s major benefits is in its tax efficiency. The CAIF can not only take advantage of the charitable tax status normally available to registered charities, but as an FCA authorised fund, it can also exploit the management-fee VAT exemption. Estimates suggest that this could save charities up to £12m per year in VAT.

The IA adds that CAIFs will also have more flexibility around income distribution than most authorised funds, which should help a more predictable stream for charities.

Also, the ability to have an independent advisory committee to represent the interests of charity unitholders is an option, the IA said.

IA Fund and Investment Risk Specialist Peter Capper called the new vehicle “a positive development for the Charity sector and the effective management of charity assets.”

"This new structure combines clear tax efficiencies and full regulatory protection in a tailor-made product suited to the asset management industry's clients in the charity sector, which clearly need every advantage they can get in order to deliver for good causes," he commented.







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