The Investment Association has hit out at Labour plans to widen the tax net for hedge funds, arguing this could harm the economy and increase the costs of UK funds.
The Financial Times reports that Labours wants to remove “intermediaries relief” tax which allows investment funds to avoid paying stamp duty on share purchases.
The party is also looking to reintroduce the stamp duty reserve tax which was abolished by Chancellor George Osborne last year in order to favour growth of Aim markets.
Labour has described the removal of the reserve tax as “a £145m tax cut” for hedge funds.
But the IA argues the proposals will raise costs for ordinary investors and discourage foreign fund companies from setting up in the UK.
Until last April, UK funds also used to pay an additional form of SDRT. The amount was based on a complicated calculation based on unit sales and purchases and the fund’s assets. The actual amount of tax averaged only 0.04 per cent.
Since the introduction of this double taxation in 2000, the trade body claimed the UK has lost billions of pounds of tax revenues.
The IA estimates the economic tax benefits to the Government of the current system is £1m for every £1bn of assets domiciled in the UK.
IA chief executive Daniel Godfrey says: “The abolition of stamp duty for authorised funds is not a tax break for hedge fund billionaires, but a necessary step to make UK funds viable compared with international funds. They are enjoyed by ordinary people.”