UK OEICS and unit trusts could now be seen as attractive investments for overseas investors followin...
UK OEICS and unit trusts could now be seen as attractive investments for overseas investors following the removal of inheritance tax and stamp duty liabilities today by the Treasury.
Ruth Kelly MP, financial secretary to the Treasury, has announced the relaxed rules, governing products such as OEICs, in a bid to make the UK more attractive to non ordinarily resident (NOR) investors who might otherwise take their business to Luxembourg and Dublin.
Overseas investors will now be able to receive the gross interest earned from authorized funds so it is exempt from inheritance tax, as well as an extension of exemptions from stamp duty and stamp duty reserve tax (SDRT), if AUTs merge with OEICs after November.
Such moves do not immediately turn the UK market into another offshore market for overseas investors, but it does remove some of the boundaries which have discouraged people from placing their assets in the UK.
Until now, non-resident investors using UK-based OEICs and AUTs have received interest minus 20% tax because of terms previously placed on these products, however, most European Community countries have already removed these restrictions, making the UK less competitive when attracting new business, says Kelly.
"Today's measures will make UK OEICs more attractive to foreign investors. The rules governing overseas investors no longer work well. Removing the need for a NOR declaration and the potential inheritance tax charge will allow UK fund managers to compete on an equal footing with overseas rivals," says Kelly.
"The Government recognises that the stamp duty exemptions continue to be helpful in allowing authorised unit trusts to take advantage of the flexible and modern structure of an open ended investment company.
The merger of two similar funds can benefit investors and fund managers alike by reducing costs and increasing efficiency.
"These measures are an important contribution to our ongoing assault on red tape and our support for the City as a major financial centre, both within the EU single market and globally."
It has always been the case until now that overseas investors would end paying inheritance tax on UK-based investments, even if their country of residence has a double taxation agreement with the UK. But changes mean IHT requirements are removed entirely.
Extensions of stamp duty exemptions simply allow fund managers to merge AUTs with OEICs until the November 30 deadline runs out, however, that term is being extended, offering greater levels of offshore and overseas business into the UK again.
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