UK eyes tax boost for asset managers to ease Brexit fears
Ministers to reconsider tax treatment of people working for short periods in Britain
The UK government has published a new strategy paper intended to support the country’s £8.1tn asset management industry, including plans to reconsider the tax treatment of people working for short periods of time in the UK.
Britain’s asset management sector has grown substantially since the financial crisis, and now employs 38,000 people directly and a further 56,000 jobs indirectly, according to the government.
The industry is the second largest in the world, behind the US, with a 36 per cent market share in Europe. But the sector has grappled with Brexit-related uncertainty in recent months, and faces increasingly strong competition from France and Germany.
Chancellor Philip Hammond said on Wednesday that UK asset managers serviced millions of clients and generated about 1 per cent of the nation’s gross domestic product.
“The industry makes an invaluable contribution to the UK economy that must be recognised and built upon,” he said.
The wide-ranging report, published on Wednesday, included a commitment from the government to examine next year whether to overhaul rules for short-term business visitors.
Under the current “60-day rule”, employees of overseas companies that work temporarily in Britain are exempt from UK income taxes, even if they are paid by the UK arm of their employer.
However, employees who work in a foreign branch of a UK-based company and make short business visits to the UK are taxed on their earnings for the time spent working in Britain.
The industry has lobbied heavily for the system to be changed. The government said in Wednesday’s report that the current scheme “creates an administrative burden for the UK company, which has to account for ‘pay as you earn’ on foreign-paid earnings for the period of time spent working here”.
Stephen Barclay, the City minister, said: “The UK is a world leader in asset management, and it is vital that we keep it that way. The government will come to a view, in spring, on whether to consult on making changes to the short term visitors rules in this area.”
Chris Cummings, chief executive of the Investment Association trade body, welcomed the report, saying it would give the asset management industry the “road map” it needed to navigate Brexit.
The paper also called for more concerted efforts to encourage asset managers based overseas to operate in the UK, as well as more backing for domestic asset managers developing innovative investment strategies, such as green finance and “social impact” investing.
The report also included a commitment to “strengthen the UK’s asset management talent pipeline” by working with British universities and promoting so-called fintech initiatives, such as a blockchain-enabled digital fund. The paper also said the government would build on the work of the asset management task force, which was launched in October to promote communication between government, regulators and industry.
David Cameron’s coalition government first launched an official investment management strategy in 2013, intended to increase the number of funds domiciled in the UK. That strategy has been widely seen as a success. In 2013, the sector had £5tn under management; the industry currently has £8.1tn under management.