Zero tax
uy now, pay later, is the second rule of tax management. The first rule is not to pay at all, but this can be more difficult. A new security with chances under both rules comes from the fertile minds at Morgan Grenfell, who are raising £28 million for Redland with a sterling zero coupon bond, the first of its kind. The bond has a seven-year lifetime. Redland sets interest aside, year by year (and so gets tax relief), but does not pay it out to the bondholder until the seven years are up (so he need not pay tax until then). If he sells the bond during its lifetime, he then pays tax on the accumulated interest. So at least he has the choice of when to pay, and if he times it right, in terms of his tax year, he could get an extra 18 months' grace from the Revenue. If he expects his income to fall (as it will if he is nearing retirement), he can time his scale to coincide with the fall in the marginal tax rate. And if he is thinking of going abroad, he may manage to escape tax altogether.
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