The Investment Management Association has warned Labour proposals to re-introduce the ‘Schedule 19’ tax paid by UK-based funds would cost savers and investors £145m a year.
Speaking at the Labour party conference in Brighton at the weekend, Ed Miliband pledged to scrap the so-called “bedroom tax”, a reform to housing benefit which came into force in April.
Miliband said the move would be funded by closing “shady tax loopholes” and “tax breaks for hedge funds”.
The “tax breaks for hedge funds” reference relates to the Schedule 19 tax paid by UK-based funds. Chancellor George Osborne announced plans to scrap the tax from next April in the Budget. The tax is mostly paid by UK fund managers.
IMA chief executive Daniel Godfrey says: “This tax was paid by UK authorised funds, not hedge funds. Its re-introduction would impose a £145m annual cost on the ordinary savers, investors and pensioners, who are the beneficiaries of its abolition.
“This tax is not paid by offshore funds that can be freely bought by UK citizens. As a consequence of this ordinary UK citizens are being driven to invest through offshore financial centres.
“This unequal playing field has resulted in UK asset managers managing more assets in funds domiciled in Luxembourg and Dublin than in the UK.
“At a time when it is so important that people save and invest, both for their old age and to provide the capital we need for economic growth, we should be seeking more ways to encourage them rather than the opposite.”