The AIC is defending the role of British offshore financial centres and recommending HM Treasury supp...
The AIC is defending the role of British offshore financial centres and recommending HM Treasury supports their continued operation.
In its response to the Foot review of British offshore centres, the AIC says the growth of the closed-ended investment company sector which has grown £16.5bn offshore over the past five years compared with just £2bn onshore, is a vote of confidence for the centres.
In addition, the AIC estimates over £300m is paid to the UK in management fees each year by Channel Islands domiciled investment companies, illustrating the positive contribution the offshore investment company sector makes to the UK.
Taking into account fees paid to UK based investment banks and brokers related to IPOs, the AIC also estimates an additional £400m has been paid into the UK since 2001.
"The growth of the offshore investment company sector has been a real positive for the evolution of the industry as a whole, allowing the sector to adapt to meet demand for investment strategies which cannot be delivered tax efficiently in the UK," says Daniel Godfrey, AIC director general.
"But tax efficiency should not be confused with tax avoidance - far from it. In fact returns received by UK investors in offshore funds are taxed in the usual way, involving no tax loss to HM Treasury.
"The use of offshore jurisdictions simply means that investors are not taxed twice - once inside the fund and then again when they receive investment returns.
"This outcome has long been supported by the Government where investors are using collective investment vehicles."
Godfrey adds without the offshore sector, the investment company sector as a whole would not have developed in the way it has.
"The direct consequence of this would have been reduced choice and competition for investors and a lower volume of financial services activity in the UK, with lower potential tax revenues and employment opportunities."
