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Autumn Statement: passive/active war takes twist as ETF stamp duty cut

Industry experts have reacted positively to news stamp duty tax on exchange traded funds (ETFs) will be abolished.

'Now that the UK has said it will not apply stamp duty, it really levels the playing field,' Adam Laird, passive investment manager at Hargreaves Lansdown told Wealth Manager.

He described the move as 'really positive for the UK,' noting that most ETFs are currently traded in Luxembourg and Dublin as investors have been deterred by the stamp duty imposed in Britain.

'Investors in the UK will be more comfortable now the FCA are regulating the products they are investing in,' he added.

'At a high level, this is good news for investors and should help the growth of ETFs as investors use the tool as part of their asset allocation,' Axel Lomholt, head of product at Vanguard agreed, although he pointed out that there are currently not many ETFs domiciled in the UK.

Matt Johnson, head of distribution EMEA at ETF Securities, thinks the tax cut will change this and make the UK a more popular destination for ETFs.

'In a world where we are witnessing increased regulation as well as taxation of financial products, it is very encouraging to see a government recognising the importance of this industry to investors and taking steps to minimising the costs of ETPs,' he said.

Mark Johnson, head of UK sales at iShares agreed that the move 'should ultimately increase consumer choice and support the growth in the use of ETFs' across the industry.

The move also has the potential to increase the attractiveness of ETFs against active funds in the well documented price war between the two product types.

While Hector McNeil, Co-CEO of Boost ETP, greeted the change as a positive he stressed that details of the proposals have not yet emerged. 

'The Autumn Statement doesn’t state if this affects mutual funds or not. If it doesn’t then this is a major advantage for ETFs as they will cost even less and track better compared to mutual funds,' he said.

'The one puzzling statement is that the expected result is fund companies will base ETFs in the UK now. I really don’t see this happening and suspect fund companies will continue to domicile in Ireland and Luxembourg.'

Nick Hungerford, Nutmeg chief executive, said his key concern was whether the savings would be passed on to customers.

'This is really good news but any reduction in costs has to be passed on to customers, not used to increase profit margins,' he said.

Mr Hungerford noted there was a growing trend in ETF investing, but that the UK was still behind other countries, offering less choice to investors. 

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