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Budget improves competitiveness of UK funds industry

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Rachel Hanger, investment management tax partner at KPMG, says the Budget’s adoption of the investment versus trading consultation paper has levelled the playing field for both fund pro

Rachel Hanger, investment management tax partner at KPMG, says the Budget’s adoption of the investment versus trading consultation paper has levelled the playing field for both fund providers and investors.

‘We are pleased to see that the Treasury adopted the measures outlined in the investment versus trading consultation paper, which means that there is no longer a disincentive for fund providers to establish trading funds in the UK,’ says Hanger.

‘In terms of benefits for investors, they will now be taxed at the same rates whether investing offshore or onshore. However, there is a question mark as to how this will be implemented in practice as offshore funds, for the first time, will have to monitor the proportion of their investments held in equities and bonds, potentially on a daily basis.

‘In summary, while these measures finally make the UK more competitive with offshore centres in terms of product design, managers themselves may choose to locate elsewhere given they may now face a 50 per cent personal tax rate as well as reduced tax relief on pension contributions.’

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