HM Treasury has announced it has set up a working group to consider the effect of taxation on the competitiveness of UK funds.
In October the Investment Management Association (IMA) and consultants KPMG jointly published a report which suggested fund investors were more attracted to offshore locations, such as Luxembourg and Ireland, than the UK because of its “unfavourable tax regime”.
As a result Ed Balls, Economic Secretary to the Treasury, yesterday announced in a speech to the Scottish Financial Services Industry that the government has decided to set up a joint IMA, Treasury and HM Revenue & Customs working group to consider the findings of the 58-page report.
Balls says the working group will consider how to improve consultation and communication between HMRC and the investment management industry and will also aim to address a number of complex technical issues.
And he says some of the issues to be discussed by the group will include:
- The tax barriers for authorised investment funds which invest in property, a subject on which Balls says there is “ongoing consultation”;
- The operation of the Stamp Duty Reserve Tax rules for UK funds,
- And the trading/investment boundary as it applies to funds.
However in his speech Balls points out “these are complex issues and while I can't promise that we can deliver change on all these issues, we are taking the findings of the report extremely seriously”.
And he reveals the progress made by the new body will be reported in May 2007 at the next meeting of the High Level Group, a body set up by Gordon Brown in this year’s Budget to develop “a coordinated strategy to help ensure the future success of our financial services industry and to extend our global reach even further”.
Balls adds: “We in government have a duty to get the framework right to allow asset management to continue to flourish - but also to support long-term investment in our economy. Because asset management is important not just for jobs, but also for long-term investment in our economy.”
Tom Brown, head of investment management and funds at KPMG UK, welcomed the announcement by pointing out it is great news for the UK investment management industry that the government intends to seriously consider its views.
And he adds: “We look forward to a renewed working relationship between the tax authorities and the investment management industry as there is still a window of opportunity, albeit a small one, to establish the UK as a competitive funds centre."
Meanwhile Richard Saunders, chief executive of the IMA, says: “We commissioned the KPMG report in order to engage the Treasury in a serious debate about the unintended consequences of UK tax rules. I am delighted Ed Balls has responded in kind and look forward to working with him and his officials on the very real issues the report has raised."
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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