After a short burst of intense consultation, the Treasury has today launched its Investment Management Strategy. Nathan Hall, Financial Services Tax Partner at KPMG in the UK, described the move as “a very strong statement of intent to preserve and enhance the UK’s position as a leading global investment management centre.”
Nathan Hall continued:
“Many of the announcements are centred on funds, a part of the value chain where the UK loses out to more nimble EU competitors. By improving the tax treatment and reducing the regulatory burden it is hoped that the UK’s share of funds will increase and this in turn will help strengthen the overall investment management sector. Abolition of Schedule 19 SDRT is a major headline grabber and signals that the Treasury is committed to enhancing the marketability of funds (the measure costs funds very little tax but can cast a shadow over UK funds). The step was a natural progression after exclusion of the new contractual schemes from Schedule 19 (subject to meeting anti-avoidance legislation). The announcement comes as the European funds industry is trying to model the impact of the proposed EU financial transaction tax – it is hoped that the UK’s move will encourage European counterparts to consider suitable exemptions.
The paper also provides good news for alternative fund managers. The commitment to take a sensible approach on implementation of the Alternative Investment Fund Managers Directive and tax certainty comes at a good time. The paper’s estimate of the level of funds about to come onshore could be optimistic but the important point is that the Treasury is acting now before on-shoring trends are known, not when it’s too late. However, careful attention needs to be paid to anti-avoidance provisions involving partnerships – broad changes affecting the managers themselves could more than offset the positive impact of the broader strategy.
“In the short term, such developments will mean that the UK makes more short lists when managers look where to locate funds. The longer term challenge is selling the UK as a funds centre – if the UK is to make a breakthrough into new markets, the Treasury’s ideas in this area, involving the TheCityUK, IMA, AIMA and UKTI, will need to work and this will require sustained effort as the traditional fund centres have a clear head start.”
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About KPMG:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
