Government reveals post-Brexit plan for asset managers

Government reveals post-Brexit plan for asset managers

HM Treasury has revealed how it plans to develop the asset management industry, with fintech and environmental and social impact investing to play a central role.

Back in 2013, the government published the Investment Management Strategy, which consisted of a package of measures to address the competitiveness of the UK asset management industry and focused in particular on enhancing the UK’s attractiveness as a centre for fund domicile.

In a 39-page paper published today (6 December), the government updated that strategy to prepare for the world post Brexit stating it intends to use the UK’s "world leading position in fintech" to create Blockchain enabled digital funds.

A digital fund uses blockchain distributed ledger technology to streamline back office fund administration functions (which is more commonly referred to as disintermediation), to increase speed and reduce cost while increasing resilience in their business.

By reducing the number of intermediaries, a fund will make cost savings that could result in lower costs for the end investor.

A blockchain enabled fund would also enable real-time clearing and settlement.

As part of its fintech workstream, the Investment Association, together with its members, is looking to progress the creation of a fully digital fund in the UK and the government backed this move as part of the new investment management strategy.

The government's strategy published today also promised to provide “the support that UK asset managers need to be global leaders in developing innovative investment strategies – such as green finance and social impact investing – to meet the changing investor demands.”

The 39-page paper also outlined plans to establish centres of excellence at leading UK universities in order to develop the “pipeline” of new talent for the asset management industry.

A stable and responsive tax and regulatory environment that is proportionate to risks and responsive to new innovations was also promised.

In the paper, the government confirmed it would review tax rules for employees who work in a foreign branch of a UK-based firm who make short business visits to the UK.

These individuals are taxed on their earnings for the time spent working here, while employees from firms with foreign subsidiaries who make similar short visits are exempt from tax on their earnings under the UK’s network of double tax treaties.

This creates an administrative burden for the UK company, which has to account for Pay As You Earn on foreign-paid earnings for the period of time 12 spent working here.

The government stated in the paper that it understands industry views on the burden that these rules create, and will consider the issues that have been raised by industry groups and will decide at the start of 2018 whether to consult on making changes to the short term visitors rules in this area.

The government also backed market-driven innovation in Islamic finance and confirmed it would ensure there is a level playing field for Sharia-compliant financial products, by actively keeping the tax and regulatory regime under review to ensure these are treated on equal terms as conventional ones.