The Association of Investment Companies (AIC) has urged the Treasury to remove stamp duty on the purchase of investment trust, real estate investment trust (REIT) and venture capital trust (VCT) shares.
Responding to the Treasury’s consultation on UK funds, the AIC said it recommends stamp duty and stamp duty reserve taxes (SDRT) are scrapped for the purchase of investment trust, REIT and VCT shares.
Since 2014, the majority of investments into open-ended funds are exempt from stamp duty.
Ian Sayers, chief executive of the AIC, said: “Investment trusts, investment company REITs and VCTs already pay stamp duty, SDRT or stamp duty land tax (SDLT) when they purchase their underlying investments. Levying stamp duty again when investors buy their shares leads to double taxation.
“UK policy has traditionally ensured a neutral tax position for the end investor, so that an investor in a collective fund will be in a similar tax position as if they had invested in the fund’s underlying assets directly.
"Removing stamp duty on purchases of investment trusts, investment company REITs and VCTs will create a fair tax position for investors and maximise competition in the public interest.”
At the 2020 Budget, Rishi Sunak announced a review into the UK funds regime with the aim of enhancing the UK’s attractiveness as a location for asset management.
The call for input, which ended yesterday (April 20), asked the asset management industry to respond to a number of challenges, which includes “a perception that there are unnecessary barriers and complexity within the existing REITs rules.”
REITs are seen as the natural alternative to open-ended property funds for investors looking to gain exposure to the real estate market, as open-ended property funds have faced challenges in the past few years due to their issues around liquidity.
The Treasury review is also looking at solutions to this issue.
Sayers added: “There is no policy rationale for this difference [in tax treatment] as investment companies and open-ended funds serve the same investor need. It is time that this distortion is addressed.”
Yesterday (April 20), M&G was the latest to announce it will re-open its property fund after gating for withdrawals for almost 18 months due to economic uncertainty and liquidity issues.