The Government has moved to exempt offshore investors from paying tax on platform rebates.
From 6 April, all platform rebates to investors have been taxable following an HMRC ruling in March.
But in a written ministerial statement yesterday, Treasury economic secretary Sajid Javid said taxing offshore investors could affect the UK’s competitiveness.
The Government has immediately reversed the tax charge for offshore investors and launched a four week consultation to set out detailed new rules.
Javid said offshore investors do not normally pay tax on interest or equity positions and rebates are similar to distribution payments.
He said: “This difference could have a profoundly negative impact on the international competitiveness on the UK funds industry.
“Imposing a requirement to withhold tax would therefore be at odds with the Government’s investment management strategy, published at Budget 2013.
“The Government is determined to improve the UK’s competitive position as a centre for investment management.”