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Scrapping ETF stamp duty “insufficient” to lure providers to UK

Firms are divided on whether the Chancellor’s move to axe the 0.5 per cent stamp duty paid by exchange traded funds will see more UK-based ETFs, with concern the may be “insufficient” to lure providers based abroad.

Chancellor George Osborne announced in his Autumn Statement last week this tax will now be scrapped from April. The move follows the Budget announcement that stamp duty for Aim shares would be abolished.

Osborne said making units in the ETF exempt from stamp duty would hopefully encourage funds to locate in the UK. 

Investment Management Association director of regulatory affairs for investment funds and retail Julie Patterson says: “This announcement is a further important step in a series of significant changes made by the Government over recent months to make the UK a more attractive location for investment funds to be based.”

Vanguard head of product Axel Lomholt says: “This is a positive development for investors and effectively creates a level playing field for local and foreign ETF domiciles.”

But Hargreaves Lansdown senior investment manager Adrian Lowcock says: “It is a bit early to talk about re-domiciliation but it will make things simpler in terms of structure.

“The ETFs sector is a growing market so this move may bring more of this to the UK in future.”

Brewin Dolphin head of fund research Ben Gutteridge says: “The change is probably insufficient to entice major ETF providers out of their existing locations.

“This is due to a combination of factors including a well established and successful financial infrastructure, prohibitive relocation costs, and more favourable corporate tax rates.”

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  1. Too early to tell, one would hope that removal of SDRT and its cumulative effect on performance plus the attraction (if relevant) to a UK domiciled ETF may well offset the downside of higher CT as opposed to their current domiciles.

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