The government has launched a review into the UK funds regime in a bid to ensure the ongoing competitiveness and sustainability of the sector.
As an initial step in this review the government announced it would review the VAT charged on fund management fees.
It has also launched a consultation to gather evidence and explore the attractiveness of the UK as a location for the intermediate entities through which alternative funds hold fund assets.
The government said that despite the general attractiveness of the UK corporation tax system for holding company structures, there remain barriers to the establishment of these intermediate fund entities in the UK which do not exist in some other jurisdictions - leading to these entities being located outside the UK.
It added there was a view within the asset management industry these barriers could be addressed through "low-cost, targeted changes".
The government said it is prepared to make legislative changes in response to its consultation if it could be demonstrated they could bring "clear benefits" and facilitate the flow of capital, income and gains between investors and underlying investments via UK asset holding companies.
But it said it was not prepared to make changes that took significant amounts of existing UK taxable income or gains out of the scope of taxation in a way that was inconsistent with the principles of the existing tax system or created unprotected risks of abuse and avoidance.
Chris Cummings, chief executive of the Investment Association, said: "We look forward to contributing to the Government's review of the UK's funds regime and share its aim to make the UK a more attractive location for investment managers to do business."
He said that with the UK "already a leading hub for the investment management industry" it was vital that it remained competitive.
"We are pleased that the Government has listened to our industry and will be consulting on simplifying the process for allowing investment funds set up overseas to be marketed in the UK. It is right that savers have access to the widest possible choice of funds," Cummings added.
This article first appeared in our sister title Professional Pensions
