PRESS RELEASE
 
For immediate release: Tuesday 10th October
 
UK losing out to overseas fund centres
 
A report written for the Investment Management Association (IMA) by KPMG has concluded that the UK tax regime for funds has caused the UK to lose out as a fund domicile.  Despite its position as a vibrant and leading centre for investment management, the UK is failing to attract new investment funds which are instead being set up in Luxembourg, Ireland and elsewhere.  Many investment managers believe this is down to the UK's unfavourable tax regime.
 
In the last two years net sales of non-UK funds have grown from 1 per cent to 20 per cent of the UK market, while sales of UK funds abroad remain very low.  This trend is set to continue particularly as funds evolve and become more complex.  This matters because, alongside fund domicile, go many of the jobs that form the asset management value chain. 

Jane McCormick, Head of Tax, Financial Services, KPMG commented:

“The growth in fund assets domiciled here has been well behind the competition.  Between 1995 and 2005, growth in fund assets domiciled in Luxembourg and Ireland has been respectively ten times and twice that of the UK.  The view of the vast majority of UK investment managers we interviewed is that the UK’s complex tax system for funds is largely to blame.

However, the survey also highlights that there is not yet a clear EU domicile of choice for alternative investments.  Given the strength of the UK’s financial services sector, there is a real opportunity for the UK to fill that gap.  Changes to the tax system are required before the opportunity is lost.” 

Julie Patterson, Director of Regulation, Operations and Taxation, of IMA commented:
 
"The UK is losing out because of the unnecessarily complex and burdensome tax regime.  Funds are being established overseas and many jobs go with them, leading to a loss of revenue for the UK.  The fear is that the UK investment management industry is approaching a tipping point with more and more of the value chain being domiciled overseas.

But it is not too late to do something about it.  The industry is not calling for tax breaks but for a simpler tax regime which will be beneficial to investors, the government and industry alike.”  
 
A copy of the report can be found here.

 
- ENDS -

Notes to editors
1.  IMA commissioned KPMG to consider the influence that taxation has on the fund domicile decision and the further impact this has on the competitiveness of UK funds and the wider UK economy.
2.  KPMG interviewed 26 investment management groups and 4 administration companies.  The groups together managed over 60% of UK authorised funds as at 31 May 2006.
3.  Click here for a graph showing the growth in registered fund assets in the UK, Ireland and Luxembourg since 1991. 
 
For further information contact:
Mona Patel, Head of Communications, IMA, 020 7831 0898/07834 089 332
Judith Dow, Corporate Communications, KPMG, 020 7694 8584/07786 197 718
Margot Cowhig, Corporate Communications, KPMG, 020 7694 4246/07920 274 856

About IMA:
The IMA is the trade body for the UK’s £2800 billion asset management industry.  The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.  Our role is to represent the industry and promote high standards.

About KPMG:
KPMG is the global network of professional services firms who provide audit, tax and advisory services. KPMG LLP operates from 22 offices across the UK with over 9,000 partners and staff.  KPMG recorded a UK turnover of £1.28 billion in the year ended September 2005. KPMG LLP, a UK limited liability partnership, is the UK member firm of KPMG International, a Swiss cooperative.