The Association of Investment Companies (AIC) says tax breaks for investment trust bond holdings in today's budget could see a new market for closed ended fixed interest funds.
The trade body is confident a reference to tax efficient investment for the companies into interest bearing assets means proposed regulations last year will form part of the finance bill.
This would mean investment trusts will be allowed to opt out of paying tax on bond yields, provided the savings are passed on to shareholders as interest.
AIC director general Daniel Godfrey says: "This is pretty much exactly what we have been pushing for so obviously we are very pleased.
"I think over time it will very possibly create a whole new market for fixed interest investment trusts where there is not really one before."
According to the Budget report: "From 1 September 2009, investment trust Companies will be able to invest tax efficiently into interest bearing assets."
It adds: "Budget 2009 announces a new tax framework for investment trust companies to enable tax-efficient investment in interest bearing assets."
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