Press Release
New legislation needed for UK to compete with other fund centres
Thursday, July 3 2008
In a speech in London today, Richard Saunders, Chief Executive of the Investment Management Association (IMA) called on the Treasury to introduce further tax reforms to allow UK funds to compete with other fund centres in Europe on equal terms.
He said, "It is an open secret in the funds world that if you want to launch a new product you don't base it in the UK and that is for tax reasons. This is not to minimise or avoid your own taxes, but to avoid complexity and to reduce the risk of your client being exposed to an unexpected and unjustified hit. Research by IMA and KPMG in 2006 and 2007 confirms this.
"We have seen some reforms. But we have not yet achieved the fundamental reform that the KPMG report said was needed to alter perceptions."
Richard Saunders recommended the following reforms be made as part of a wider package for the 2009 Budget:
- Introduction of a tax-exempt regime for UK authorised funds.
- Introduction of legislative certainty that funds will be treated as investing, not trading, for tax purposes.
- Abolition of Schedule 19 Stamp Duty Reserve Tax on fund units.
- Removal of the 10% limit on single investors in Qualified Investor Schemes, which has acted as a severe constraint on their development.
Richard Saunders went on to say, "We do not want tax breaks or the Treasury to spend a lot of money on us. In fact, our latest information is that UK-based fund managers run €535bn in Ireland and Luxembourg alone. If those funds were located in the UK instead, we estimate that the Treasury would get an extra £300m a year in employment and corporate taxes.
"We need a regime that does not work to the disadvantage of the UK and encourage business to move offshore. At a time of economic slowdown and a growing public sector deficit, that is simple good sense.
"I believe the goodwill exists in the Treasury to address these issues with the seriousness they deserve. The next few weeks and months will show if my optimism is right."
A copy of Richard Saunders' speech can be found here.
The IMA has also submitted evidence to the Treasury Select Committee inquiry into offshore financial centres. In its submission it argues that the UK is losing out as offshore domiciled funds are becoming the preferred choice over UK domiciled funds for regulatory and tax reasons. A copy of the IMA submission can be found here.
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