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IMA Urges Brown To Keep UK Fund Industry Competitive

by Robert Lee, Tax-News.com, London

28 February 2007


The UK Investment Management Association (IMA) is calling on Chancellor of the Exchequer Gordon Brown to bring about key tax and regulatory reforms in the 2007 budget, to ensure that the UK funds industry remains internationally competitive.

IMA seeks early action in two areas in next month's budget speech. First, the discriminatory tax regime for authorised investment funds investing in commercial property and, second, the anti-competitive Schedule 19 Stamp Duty Reserve Tax (SDRT).

Authorised property funds currently suffer 20% corporation tax on rental income, with no option to reclaim the tax for UK tax-exempt investors. In contrast, both property funds domiciled offshore and those subject to the new real estate investment trust (REIT) regime are able to reclaim for exempt investors. IMA is calling for this anomaly to be resolved.

The IMA said that the imposition of stamp duty reserve tax on fund units imposes complex compliance duties on funds, but raises minimal amounts of revenue for the Exchequer. It is also a competitive disadvantage for UK funds compared to offshore funds. IMA is therefore calling for outright abolition of this regime.

The Association has also called for: reform of the offshore funds regime, which currently acts as a barrier to the development of multi-tiered funds; technical correction to the 2004 Finance Act in respect of "persons by whom registered pensions schemes may be established" - because the wording, if left, will perpetuate a closed market for pension provision; and a broader debate on the issues regarding annuities and the provision of income in retirement.

Richard Saunders, Chief Executive of the IMA commented:

"Sales of property funds in the UK are at record highs with a growing appetite for those particularly using exposure to commercial property. It is therefore vital that in order to keep the investment funds industry competitive and on a par with other investment products the Government addresses the rules for tax-exempt investors."


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