UK fund managers now run more money in offshore vehicles than those domiciled in Britain and the trend will continue to increase should the Government not implement a more competitive tax system, the IMA warns.
Speaking at the IIR Tax Conference in London today, IMA chief executive Richard Saunders says UK funds are struggling to compete with offshore domiciled offerings due to unfavourable regulatory and tax burdens.
The IMA is calling on a tax-exempt regime for UK authorised funds, which would enable fund houses to look at Britain as an equal to other European centres such as Ireland and Luxembourg.
Over the 10 years to end 2007, Irish-domiciled funds grew at a compound rate of 34% from €43bn to €806bn – where as the UK fund industry increased by only 11% over the same period, from £157bn to £468bn.
"It is an open secret in the funds world that if you want to launch a new product you don't base it in the UK and that is for tax reasons,” Saunders says.
“This is not to minimise or avoid your own taxes, but to avoid complexity and to reduce the risk of your client being exposed to an unexpected and unjustified hit.
“The IMA’s forthcoming survey of the industry will show that UK managers now run more money in offshore funds than in UK ones.”
Saunders recommended a number of changes be implemented in the 2009 Budget, including:
- A tax-exempt regime for UK authorised funds
- A legislative certainty that funds will be treated as investing, not trading, for tax purposes
- Abolition of Schedule 19 Stamp Duty Reserve Tax on fund units
- Removal of the 10% limit on single investors in Qualified Investor Schemes
“Our latest information is that UK-based fund managers run €535bn in Ireland and Luxembourg alone,” Saunders says.
“If those funds were located in the UK instead, we estimate that the Treasury would get an extra £300m a year in employment and corporate taxes.
“At a time of economic slowdown and a growing public sector deficit, that is simple good sense.”IFAonline
2019 Survey opens in June
'Necessary steps' taken
Penalty payments and enforcement policy
Fees as low as 0.04%
Client procurement costs ‘unsustainable’