It was announced in the 2009 Budget that legislation will permit the introduction of tax elected funds where the tax is effectively borne by the investors and not the fund. The effect of these changes will be that UK dividends received by tax elected funds will remain non taxable and will be distributed as a dividend to investors. Such dividends will be subject to tax as dividends in the normal way in the hands of the investors. All other income of the fund should be distributed as a non-dividend (interest) distribution. The fund will receive a tax deduction equal to the amount of non-dividend (interest) distributions made. Such distributions will be subject to tax as interest in the hands of investors. As a result, the tax elected fund will not be subject to tax on non-dividend income received provided it is distributed in the same accounting period to investors for taxation in their hands.