Application of anti-streaming rule for cash PIEs

2012 amendment to the anti-streaming rule clarifies that it should not apply when a Portfolio Investment Entity invests only in financial arrangements.

Section HM 17 of the Income Tax Act 2007

The anti-streaming rule has been amended to clarify that it should not apply when a PIE invests only in financial arrangements, as the streaming for such a PIE has no tax effect and can be useful for commercial reasons.


The PIE rules contain a specific rule to prevent the streaming of different types of investment returns to different investors. This rule is designed to combat tax minimisation strategies. For example, in the absence of the rule a PIE would be able to stream capital gains made on shares (which are not taxed) to its high tax rate investors and stream dividend income (which is taxed) to its low tax rate or charity investors.

This rule creates some difficulties for so-called "cash PIEs". Cash PIEs provide investors with products similar to standard bank accounts, but are structured as PIEs.

Cash PIEs often offer different investors different interest rates (depending on the investment term, for example) but have only one investment - a term deposit with a bank. To give effect to the different interest rates offered to investors, the PIE streams the interest it receives on its term deposit. It allocates a greater percentage of the interest received to its investors entitled to high interest rates and a lesser percentage to its investors entitled to low interest rates. This type of streaming does not provide any tax advantage to investors. It is merely a commercially sensible way of offering different interest rates to different investors.

The anti-streaming rule has therefore been amended so that it does not apply to PIEs that invest in only financial arrangements. This will clarify that the typical cash PIE structure as described above does not fall foul of the PIE rules.

Application date

The amendment applies from the date of Royal assent, being 2 November 2012.