| LONDON, March 20
LONDON, March 20 Britain's government is seeking
to lure mutual fund assets and encourage equity investment with
plans to scrap a tax on UK-domiciled funds and a levy on trades
in small company shares.
In a budget statement to parliament on Wednesday, Britain's
finance minister George Osborne said he plans to abolish the
Schedule 19 tax on UK funds to attract funds away from rival
He also pledged to abolish stamp duty on shares traded on
markets like the London Stock Exchange's AIM, favoured
by small companies, to end a perceived bias in the tax system
favouring debt financing over equity investment.
"Financial services are about 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," Osborne said.
Both measures were welcomed by the financial services
"We wholeheartedly welcome the Chancellor's decision to do
away with stamp duty tax on UK domiciled funds and AIM shares,"
said Tony Stenning, Head of UK Retail at BlackRock.
"These have long been perceived as stealth taxes hampering
savers' needs for their money to work as hard as possible for
them, particularly during these hard times of low interest
Fund management industry association the IMA said it will
help Britain, already a hub for portfolio management, compete as
a location for funds and their support services.
While London and Edinburgh are the locations for teams of
fund managers at blue chip firms like Schroders and
Aberdeen Asset Management, more funds are domiciled in
Dublin and Luxembourg.
According to Lipper, a Thomson Reuters company that tracks
the funds industry, around $1.24 trillion of mutual fund assets
are domiciled in Dublin and $2.8 trillion in Luxembourg compared
with around $1.1 trillion in the UK.
"Locations that don't have the asset management are now
effectively providing more support services than we are," Daniel
Godfrey, Chief Executive of the IMA told Reuters.
"(The UK government) has recognised the point that those
support services are not necessarily a small adjunct to asset
The abolition of stamp duty on trading shares on London's
junior market AIM has long been called for by small businesses
and their advisors who say it will help improve the availability
of equity funding at a time when bank lending is constrained.
"The removal of stamp duty on trading in AIM quoted stocks
is a very significant event for the growth market," said Philip
Secrett, Partner at Grant Thornton UK.
"Coupled with the recent rallies in global equity markets,
this stimulus should contribute to the growing momentum of
confidence and drive larger volumes of funds towards existing
AIM companies and new IPOs."