Example 2: Manipulation of admissible value
19.FSA rules prescribe that, in certain circumstances, generally to reflect concentration and counterparty risk, the admissible value of a company’s assets must be less than market value. The admissible value of the fund’s assets can be manipulated by acquiring or creating assets which have little or no admissible value. The fair value of the assets of the fund is unchanged. A non taxable addition to the fund may allow a company to create a tax effective reduction in admissible value whilst maintaining the value of the fund for regulatory purposes. Effectively this creates a tax loss where there is no commercial loss.
