Chancellor George Osborne has scrapped the UK’s stamp duty reserve tax on funds, in a move aimed at boosting the asset management industry.
“In places like Edinburgh and London we have a world-beating asset management industry, but they are losing business to other places in Europe,” Mr Osborne said in his Budget 2013 speech.
“We act now with a package of measures to reverse this decline and we will abolish the Schedule 19 tax which is only payable by UK-domiciled funds.”
The Schedule 19 stamp duty reserve tax is levied on the managers of UK-domiciled unit trusts and Oeics. HM Revenue & Customs rules state that fund groups are liable for the duty, which is charged at 0.5 per cent, when investors sell or “surrender” units in their funds.
The tax is paid directly to HMRC and fund groups usually pass this cost on to investors in the form of charges, according to the tax body.
The tax is being cut from April 1 2014 when the Finance Bill 2014 comes into force. The government estimates this will cost it £145m a year in lost tax revenues.
“Schedule 19 has been consistently cited by the industry as one of the chief obstacles to establishing new funds in the UK,” the government’s Budget statement said.
“This Budget announces a targeted package of measures to improve the competitiveness of the UK as a location for fund domicile covering regulation, marketing and tax.”
The IMA has long campaigned against the Schedule 19 tax.
IMA chief executive Daniel Godfrey tweeted: “Abolishing stamp duty on funds is crucial first step towards creating a level playing field with Luxemburg and Dublin.”
Responding to the abolition of fund-specific stamp duty reserve tax (SDRT), Mr Godfrey said the abolition of stamp duty on funds in the Budget would “give savers better returns”.
“The UK is already a world class location for asset management and this is a vital step in allowing the UK to compete as a location for funds,” he said.
“A truly world-class tax and regulatory regime for funds will deliver thousands of jobs in support services all around the UK and billions of pounds of tax revenues.”
Rob Mellor, PricewaterhouseCoopers asset management partner, said: “This is something that the industry has been requesting for some time. It is great news for the UK asset management industry as it levels the playing field with other European fund locations and should help to encourage more UK and non-UK asset managers to launch UK based fund products.”
Meanwhile, the government is also cutting its stamp duty reserve tax on investing in AIM-listed shares.
