UK Investment Body Calls For Major Tax Reform In Savings Industry

by Jason Gorringe, Tax-News.com, London

14 January 2004

The UK's Investment Management Association has called for an overhaul of the taxation system in respect of savings and investment funds, in order to encourage more people to take out long-term savings products, and to restore public faith in the system generally.

In a submission to the Treasury Select Committee, published on Monday, the IMA urged the government to: simplify the taxation of investments funds; provide “rational tax incentives” across all investment classes; and create a single regulatory framework governing pensions, ISAs (Individual Savings Accounts) and Child Trust Funds.

“With ISAs apparently being wound down and the “Sandler” product suite unlikely to have a significant impact on levels of saving, the time is now ripe for fresh thinking. This needs to combine the best features of ISAs with the vigorous pursuit of simplification throughout the system,” observed Richard Saunders, Chief Executive of the IMA.

Under the Association’s proposals, basic rate income tax payers would be exempt altogether from paying tax on fund investments, mirroring the present situation whereby higher-rate taxpayers are the main beneficiaries from investment in equity ISAs.

“The success of PEPs and ISAs demonstrates what can be achieved when Government and industry unite behind products that are simple and appropriately incentivised,” argued Mr Saunders.

The IMA is also calling on the government to speed up its proposed reform of pension taxation and not be “distracted” by the debate surrounding the $1.4 million lifetime allowance.

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