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Chancellor announces tax break to encourage exchange traded funds to UK

The Government is to abolish stamp duty on shares purchased in exchange traded funds (ETF) to "encourage those funds to locate in the UK".

The announcement, made by Chancellor of the Exchequer George Osborne as part of this year's Autumn Statement, follows a similar move in relation to shares traded on the alternative investment market (AIM) at the Budget in March.

End investors that purchase shares in ETFs will no longer be subject to stamp duty or Stamp Duty Reserve Tax (SDRT) from April 2014, according to the Autumn Statement.

"It is heartening to hear the Chancellor's move to support the financial services sector demonstrated by the move to abolish stamp duty for ETFs," said financial regulation expert Monica Gogna of Pinsent Masons, the law firm behind Out-Law.com. "This is surely another sign that the ETF industry in Europe is set to grow and compete with the much larger ETF sector in the USA."

An ETF is a low-cost investment fund in which other assets, such as stocks or bonds, are bundled for trade on a stock exchange. They are typically track indexes such as stock indexes or bond indexes.

Investment funds domiciled and listed in the UK will continue to pay stamp duty on their acquisitions of UK shares.

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