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Wednesday 3 February 2010 IMA CALLS FOR TWO MEASURES TO IMPROVE UK COMPETITIVENESS The Investment Management Association (IMA) is calling on the Government to make two practical changes which could help improve the competitiveness of the UK funds industry, in its representations for the 2010 Budget. Richard Saunders, Chief Executive of the IMA, sets out the two issues: "We are calling on the Government to abolish stamp duty on funds in the next Budget. This tax, which is unique to the UK, cuts against the principle of an equal EU marketplace. Its complexity and apparent expense make it less attractive to invest in UK funds than in those from other member countries. Abolition would stem further outflows and could bring in increased business and tax revenues. "We are also asking the Government to enable the Financial Services Authority to authorise a new type of fund structure called a contractual fund. This will allow the UK to compete effectively when the new UCITS IV Directive comes into force. It would give out a strong signal that the UK is serious about providing cross‑border funds - and would deter business from going to other EU countries. "The UK asset management industry is in a strong position to attract new business, as it has the skills and resources to do so. For every £1 billion of funds that domicile abroad, we stand to lose around £720,000 in employment and corporation taxes. These two changes would both prevent further losses and provide further opportunities." -ENDS- Notes to editors Stamp duty on funds - Stamp Duty Reserve Tax (SDRT) It is difficult to persuade continental European investors to invest in a UK fund in preference to funds elsewhere when UK funds pay a unique type of tax. It has a ‘headline' rate of 0.5% and so appears onerous, even though in practice the cost is on average 5 basis points per annum and is therefore broadly comparable with charges faced elsewhere. Its complexity as well as its headline rate are both disincentives to invest in UK funds. Contractual funds IMA's call for a tax-transparent UK Authorised contractual fund regime comes in anticipation of ‘master-feeder' structures, which will be introduced as an alternative to merging fund ranges under UCITS IV. This has attractions in terms of the efficient use of resources and economies of scale in investment. IMA believes that ‘contractual' funds represent the most efficient structures for the ‘master' fund. Tax revenues In 2007, a report by KPMG for the IMA, which has been shared with the Treasury, estimated that every £1 billion of funds domiciling offshore costs some £720,000 in lost employment and corporation taxes. See ‘The Value to the UK Economy of UK Domiciled Authorised Investment Funds' - IMA report (November 2007) on the IMA's website. IMA Budget representations A copy of IMA's Budget representations can be viewed here. For further information, please contact: Email: press@investmentuk.org About the Investment Management Association |
