Richard Saunders demands sweeping fund tax reforms

The IMA chief executive has demanded fundamental reforms to allow UK funds to compete with their Euro...

The IMA chief executive has demanded fundamental reforms to allow UK funds to compete with their European competitors.

Richard Saunders has called on the Treasury to introduce a tax-exempt regime for UK authorised funds and scrap stamp duty reserve tax on fund units as part of the 2009 Budget.

“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,” he said.

“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.”

Saunders has also called for the introduction of a legislative certainty that funds will be treated as investing rather than trading, for tax purposes.

And, he demands the removal of the 10% limit on single investors in Qualified Investor Schemes which he claims has acted as a severe constraint on their development.

“We do not want tax breaks or the Treasury to spend a lot of money on us,” he said.

“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.”

He said we need a regime that does not encourage business to flee the UK.

“At a time of economic slowdown and a growing public sector deficit, that is simple good sense,” he said.

“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.”