Press Release

IMA BUDGET REPRESENTATIONS CALL FOR ABOLITION OF SCHEDULE 19 STAMP DUTY RESERVE TAX

07 February 2008

The Investment Management Association's (IMA) budget representations call for the abolition of the Schedule 19 Stamp Duty Reserve Tax (SDRT) regime as part of a package of reforms to stem the flow of funds to offshore domiciles.

A report by IMA and KPMG1 puts the tax loss to the Treasury at £720,000 for every £1 billion of funds domiciled offshore, instead of in the UK.   UK firms are sponsors of funds totalling approximately £400 billion2 in Ireland and Luxembourg.  If these funds were domiciled in the UK, the Government would be receiving nearly £300 million additional tax revenue per annum from the industry.

UK funds have to pay Schedule 19 SDRT which is in addition to the SDRT charged on purchases by funds of UK shares. It is therefore an additional cost to investors and makes UK funds less marketable than their European counterparts. Its abolition would reduce the annual tax-take from investors to the Treasury by £70 million. The cost of abolition would, however, be offset by the increased business and employment tax from the industry if funds were not domiciled offshore. The two further measures which would also encourage firms to domicile funds in the UK are legislative certainty that authorised funds are investing not trading and a tax-exempt regime for funds. 

Richard Saunders, Chief Executive of the IMA commented:

"The UK lags behind Europe in terms of the growth in funds under management. Luxembourg and Ireland in particular have grown rapidly because of their more certain and favourable fund tax regimes. It is therefore crucial for the UK to be able to compete effectively with such centres in order to stem the flow of funds offshore, which results in a loss of business activity and consequent loss of tax to the Exchequer.

The short term cost of abolition of the Schedule 19 SDRT regime is a small price for the Treasury to pay in exchange for increased future revenue from firms choosing to domicile their funds in the UK."

IMA has also emphasised the need to resolve the following issues:

• Specific amendments to the AIF Tax Regulations
• Tax treatment on the use of swaps in pension funds
• Reform of the Offshore Funds Regime (OSFR)

A copy of IMA's submission is attached.

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1"The Value to the UK Economy of UK-Domiciled Authorised Investment Funds" -  November 2007
 2 Irish Funds Industry Association statistics and Association of the Luxembourg Fund Industry statistics