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What impact will independence have on Scottish trusts?

What impact will independence have on Scottish trusts?

Assets worth £19 billion across 40 investment trusts are incorporated in Scotland and face several uncertainties if the country votes for independence in September.

Research by Winterflood has found 27 of those Scottish trusts are also managed in the country, including several of the largest closed-ended funds available (see table below).

The chairman of one Scottish incorporated trust has estimated that the costs of re-establishing in England would be several hundred thousand pounds, Winterflood analysts Innes Urquhart and Simon Elliott reported.

‘Understandably there are no obvious benefits to a move at this stage, given the costs involved and the prevailing uncertainty. However, we are sure boards affected will keep the situation under review,’ they commented.

‘Both boards and managers will need to ensure that shareholders’ interests are not disadvantaged by being incorporated in a jurisdiction that is less accommodating than the present regime.’

Urquhart and Elliott highlighted several issues for such trusts to consider:

* First, a new Scottish financial regulator could impose extra costs and burdens.

* Second, the preferential tax treatment trusts currently receive on capital gains could be removed.

* Third, a Companies Act rewritten for Scotland could change trusts’ ability to pay dividends out of capital or buy back shares.

* Fourth, in the event a board decided to move the trust’s registration, the administrative expenses and tax implications of winding up the Scottish company and incorporating a new one in England would have to be borne in mind.

Urquhart and Elliott acknowledged, however, that it was equally probable that a vote for autonomy could be beneficial for trusts.

‘Of course it is possible that an independent Scotland may prove a more welcoming regime for investment trusts, particularly in terms of tax treatment. This could see a growth in the sector there akin to that seen in the Channel Islands over recent years.’

The largest investment trusts incorporated in Scotland (Assets)
Aberforth Smaller Companies £1.2b
Alliance Trust £3.1b
Edinburgh Investment Trust £1.4b
Murray International £1.3b
Scottish Mortgage Trust £2.9b

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