The Schedule 19 stamp duty reserve tax charge for UK funds - which has long been cited by those in the finance industry as one of the chief obstacles to establishing new funds in the UK - is to finally be abolished, the Chancellor announced in his 2013 Budget.
Explaining the moves, George Osborne said: 'Financial services are much more than banking. In places like Edinburgh and London, we have a world beating asset management industry. But they are losing business to other places in Europe. We act now with a package of measures to reverse this decline - and we will abolish the schedule 19 tax which is only payable by UK domiciled funds.'
The UK is the leading centre in Europe for asset management, but many of the funds managed by the UK are in fact based overseas, often prohibited by the charge on surrenders of units in collective investment schemes, which came into force in 1999.
The 2013 Budget's measures aim to improve the competitiveness of the UK as a location for fund domicile covering regulation, marketing and tax, with abolition of the charge as of 1 April 2014.
The moves are expected to bring tax revenues, stimulate growth, and create jobs across the country.
Commenting on the news, Nathan Hall, financial services tax partner at KPMG said that by improving the tax treatment and reducing the regulatory burden it is hoped that the UK's share of funds will increase and this in turn will help strengthen the overall investment management sector.
'Abolition of Schedule 19 SDRT is a major headline grabber and signals that the Treasury is committed to enhancing the marketability of funds (the measure costs funds very little tax but can cast a shadow over UK funds). The step was a natural progression after exclusion of the new contractual schemes from Schedule 19 (subject to meeting anti-avoidance legislation). The announcement comes as the European funds industry is trying to model the impact of the proposed EU financial transaction tax - it is hoped that the UK's move will encourage European counterparts to consider suitable exemptions,' said Hall.
The government will abolish the stamp duty reserve tax charge in Schedule 19 Finance Act 1999 on surrenders of units in collective investment schemes from 1 April 2014.
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