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Press Release

For immediate release: Tuesday 9 October 2007


Responding to the pre-Budget report, the Investment Management Association (IMA) has commented on three key areas affecting the competitiveness of the UK funds industry.

Trading versus Investing

IMA welcomes HMRC's interim statement clarifying that the use of derivatives can be treated as investing rather than trading.  This issue has become more important recently with the increasing use of derivatives in authorised funds.  The extension of this clarity to pension funds and charitable funds is also welcome.  IMA continues to call for a definitive statement that authorised funds will always be treated as investing, in the interests of tax certainty for investors.       

Julie Patterson, Director of Authorised Funds and Taxation said:

" This clarification on the use of derivatives is a welcome and helpful statement against a background of increasing numbers of funds choosing to domicile offshore where tax certainty is ensured.  We continue to believe, however, that in the longer term all funds should be treated as investing and not trading and we hope to work with HMRC to this end."

Stamp Duty Reserve Tax (SDRT) - Schedule 19 FA1999

HMRC has announced a consultation on simplification of this regime.

Julie Patterson, Director of Authorised Funds and Taxation said:

"IMA welcomes the consultation on simplification of the regime. But we believe that abolition is the best option, as this funds-specific tax puts UK funds at a competitive disadvantage, drives funds offshore and results in consequential loss of tax for HMRC.

IMA has commissioned research to support the case for outright abolition which we believe will not result in any tax loss."

Offshore Funds Regime (OSFR): a new framework

HM Treasury has today issued a Discussion Paper on reform of the Offshore Funds Regime (OSFR).  The paper addresses problems with the current regime whereby an offshore fund of funds cannot hold more than 5% of its investment in non-distributing funds, income has to be calculated according to UK standards and distributor status for funds is granted retrospectively leading to tax uncertainty for investors. 

The proposals allow offshore funds to invest any amount in non-distributing funds and make provision for sub-funds to provide information about the separation of income and capital.  Where this is not possible, the underlying fund's value is treated as income for tax purposes.  The proposals will also provide certainty for investors about the tax status of the main offshore fund, which is welcome.

Julie Patterson, Director of Authorised Funds and Taxation said:

"IMA welcomes these proposals which are a response to industry concerns about the relative attractiveness of such funds for UK investors.  The proposals represent a significant improvement.  The regime provides certainty to investors that the fund in which they are invested is a distributing fund, thus allowing income and capital growth in the fund to be taxed accordingly."  


For further information, please contact:
Noreen Shah, Communications Officer, IMA, 020 7831 0898
Mona Patel, Head of Communications, IMA, 020 7831 0898

Out of hours:
Mona Patel, Head of Communications, 07834 089 332

Investment management association