HM Treasury u-turn on fee rebates paid to non UK residents

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In a Written Ministerial Statement, the Economic Secretary to the Treasury (Sajid Javid) announced that the Government will legislate to correct unintended consequences introduced by the HMRC Brief 4/13 issued in March.

The Brief made it clear that fee rebates paid to investors were annual payments which were taxable on UK investors and crucially subject to a 20% withholding tax. While some exemptions apply most non UK investors would have suffered a 20% tax which, unless a treaty claim could be made, would be a cost to the investor.

Treasury have accepted that this could have a "profoundly negative impact on the international competitiveness of the UK funds industry". As a result, the Government will publish, for consultation, Statutory Instruments to correct the "unintended consequence" of the Brief.

The change will remove the duty to withhold tax from rebates in most cases where these payments are made to investors who are not UK resident for tax purposes.

We welcome this change which is in line with the Government's desire to improve the UK's competitive position as a centre for Investment Management. We will await the draft Instruments to see when this change is effective from and what is covered by "most cases".

Income tax must still be withheld from payments to UK investors, unless an exemption applies, e.g. to most companies, pension funds and charities.

23 May 2013

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