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UK investments losing cash to overseas accounts

11 October 2006
The UK is lagging behind its European neighbours when it comes to attracting new investment funds, according to a new report by KPMG.

Commissioned by Investment Management Association (IMA), the report notes that funds based abroad sell well inside the UK, despite the opposite not being true.

Over the last two years the UK has seen sales of funds based abroad rise from one per cent to 20 per cent of the total market.

"The growth in fund assets domiciled here has been well behind the competition," said KPMG's head of tax, Jane McCormick.

"Between 1995 and 2005, growth in fund assets domiciled in Luxembourg and Ireland has been respectively ten times and twice that of the UK.

"The view of the vast majority of UK investment managers we interviewed is that the UK's complex tax system for funds is largely to blame."

However, the report argues that London's strong position in the financial services world offers a serious opportunity to regain lost ground - that is if the tax system is simplified to ease investors' understanding.

The shadow chancellor, George Osborne, has proposed scrapping stamp duty on share dealing, something widely derided as making poor economic sense by taxing a transaction rather than production.

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