FTAdviser.com

Advertising

The investment trust trade body, responding to the Foot review of British offshore financial centres, said almost a third of trusts were based in offshore financial centres.

Part of the review's remit was to look at taxation in British offshore financial centres such as the Channel Islands, and in particular tax avoidance.

But Daniel Godfrey, director general of the AIC, said the government should not confuse tax efficiency some offshore trusts enjoy with tax avoidance.

He said: "The growth of the offshore investment company sector has been a real positive for the evolution of the industry as a whole, allowing the sector to adapt to meet demand for investment strategies that cannot be delivered tax efficiently in the UK." 

Godfrey said a number of trusts were taxed with no loss to the UK Treasury despite their offshore domicile.

"The use of offshore jurisdictions simply means investors are not taxed twice - once inside the fund and then again when they receive investment returns," he added.

"This outcome has long been supported by the government where investors are using collective investment vehicles."

The AIC said growth in the investment trust sector had been "almost entirely" offshore over the past five years, raising £16.5bn during the period compared with £2bn from onshore funds.

Godfrey said: "Without the offshore sector, the investment company sector as a whole would not have developed in the way it has."