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PBR: Derivatives to be treated as investing

HM Revenue and Customs has announced as part of the pre-Budget report that the use of derivatives can be treated as investing rather than trading.

The Investment Management Association has welcomed the decision, saying the issue has become more important recently with the increasing use of derivatives in authorised funds.

IMA says it is continuing to call for a definitive statement that authorised funds will always be treated as investing, in the interests of tax certainty for investors.

Director of authorised funds and taxation Julie Patterson says: “This clarification on the use of derivatives is a welcome and helpful statement against a background of increasing numbers of funds choosing to domicile offshore where tax certainty is ensured. We continue to believe, however, that in the longer term all funds should be treated as investing and not trading and we hope to work with HMRC to this end.”

HMRC also announced a consultation on simplification of stamp duty reserve tax.

Patterson says: “We believe that abolition is the best option, as this funds-specific tax puts UK funds at a competitive disadvantage, drives funds offshore and results in consequential loss of tax for HMRC.

“IMA has commissioned research to support the case for outright abolition which we believe will not result in any tax loss.”

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