Financial secretary Ruth Kelly said that with immediate effect she was relaxing the requirement for those who wish to receive gross interest to making a declaration that they are not ordinarily resident (NOR) and exempting the holdings of overseas investors in such funds from liability to UK inheritance tax.
She also announced the extension of the exemption from stamp duty to stamp duty reserve tax (SDRT) for authorised unit trusts that merge with an OEIC indefinitely beyond the end of next month.
Kelly said the measures ‘will make UK OEICs more attractive to foreign investors’.
She claimed current rules no longer work, saying: ‘removing the need for an NOR declaration and the potential inheritance tax charge will allow UK fund managers to compete on an equal footing with overseas rivals’.
She said the government recognised the stamp duty exemption continued to be helpful in allowing authorised unit trusts to take advantage of flexible and modern structure of an OEIC.
She said mergers between similar funds could reduce costs and increase efficiency and the measures were an ‘important contribution to our on-going assault on red tape’.
UK investors receive interest under deduction of tax but those who have signed NORs receive interest gross.
The problem has been a growing trend in Europe for funds and banks to hold investments for individuals not easily identified by fund managers.
The relaxation will be limited to those who invest in special classes of share not marketable to UK residents.
The relaxation will be included in next year’s Finance Bill but takes immediate effect from 16 October.
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