Not one fund management company has been in contact with the chair of the Manx Insurance Authority (MIA) two months after he and fellow life company chief executives raised concerns about changes to capital gains tax (CGT) and the repercussions for clients.
The UK Property Rich Collective Investment Vehicles (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2019 came into force in April and established that non-resident investors in UK property-rich funds are liable to capital gains tax.
A fund is determined as ‘property-rich’ if it has at least 75% of its assets invested in property.
Old Mutual International chief executive Peter Kenny; along with David Kneeshaw of RL360 and Mike Foy of Utmost Wealth Solutions collectively raised their concerns at International Adviser’s Fund Links Forum in October.
The hope was that it would not only highlight an issue which has seemingly been under the radar of most fund managers, but also that it would prompt some engagement between the two sides of the industry to help come to some sort of resolution.
Speaking to International Adviser more than eight weeks later, Kenny said that nobody has come back to him.
This is despite concerns that the situation could push the international life offices to pull their investments in UK property-rich funds – a rough calculation putting that figure north of £2.bn ($2.64bn, €2.37bn).
More suspensions to come?
Even the recent suspension of an M&G property fund does not seem to have lit a fire under fund managers to get in touch with the life companies.
M&G attributed the decision to Brexit and the challenging UK retail sector and did not cite changes to CGT on property-rich funds as a driver behind the decision.
But the tough UK property market and prevailing political and economic uncertainty could drive more investors to seek redemptions, potentially forcing more property funds to suspend dealings if they experience liquidity issues.
Ironically, this could help at least partly resolve the issue life companies based on the Isle of Man, Guernsey, Jersey and in Dublin are facing.
If the value of the property funds drops, so do any gains.
No gains = no CGT.