From April 2014 the government will remove the 0.5% stamp duty and Stamp Duty Reserve Tax (SDRT) charge on purchases of shares in exchange traded funds (ETFs) that would currently apply if an ETF were domiciled in the UK.

The change is widely viewed as a bid to encourage more firms to locate these products in the UK. Although London is Europe's biggest market for ETF trading, the vast majority of ETFs are domiciled offshore in order to avoid investors incurring the stamp duty.

The Treasury said the move followed the earlier announcement in the March 2013 Budget of the abolition of stamp duty on AIM and ISDX quoted shares and on UK mutual funds.

Paul Rutherford, partner, DLA Piper, said today's change in the stamp duty rules 'will be welcomed by the UK asset management industry - it should give that industry in the UK further assistance in competing with other jurisdictions for locating funds and their support services.'