UK's IMA Calls For Simplified Tax Regime For Funds

by Jason Gorringe, Tax-News.com, London

17 September 2004

The Investment Management Association on Wednesday put forward proposals for a new tax regime for investment funds.

The IMA revealed that it is calling on the Government to replace the five existing and two potential new tax regimes and rates with one simple composite tax. The single savings tax, of up to 15%, would replace income and capital gains tax regardless of what the fund was invested in, where it was domiciled and whether or not it was regulated.

The Association additionally suggested that further incentives could be offered to encourage savings and mitigate the distributional effects of a single rate.

In a statement, the body explained:

"IMA suggests four possibilities: first, exempting non-higher rate taxpayers from the single savings rate; second, offering a tax-free allowance after which receipts are taxed at the single rate; third, continuing the ISA; and fourth, and most radically, introducing a lower savings rate of up to 5%."

Richard Saunders, Chief Executive of the IMA observed that:

“The time is right for a fresh and radical look at the savings landscape. Our proposals seek above all simplicity and clarity for investors. The Government has already collapsed eight pensions tax regimes into one and the same is possible for the taxation of funds. I believe our proposals represent a further important step to a simpler and more transparent savings culture.”

Earlier this year, the IMA warned that the uncertain tax climate surrounding the UK's fund market may lead fund firms to quit the UK for other leading finance centres such as Dublin and Luxembourg.

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