Select Committee on Treasury Written Evidence

Supplementary memorandum submitted by 3i Group


  On 20 June, I gave evidence to the Treasury Select Committee as part of its inquiry into private equity. During the hearing, the Chairman of the Committee asked me to clarify in writing 3i's tax position and specifically, how much capital gains tax (CGT) the company paid during the previous financial year.

  I am confirming the answer I gave orally that 3i, as an investment trust, does not pay CGT. Investment trusts were developed to encourage individual investors to spread their risk by investing into a vehicle (the investment trust) which itself holds a broad range of investments. However, to make this work it was essential to avoid a double charge to tax: once in the vehicle and once in the hands of the shareholders. For this reason investment trusts are exempt from tax on their capital gains.

  The tax charge in 3i's Annual accounts for the financial year to 31 March 2007 of £3 million represents foreign tax paid by 3i's overseas operations and irrecoverable withholding taxes on dividends and interest received by 3i.

July 2007

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