In the Autumn Statement the Chancellor of the Exchequer announced a new exemption from withholding tax for interest on private placements. Private placements are a form of long-term, non-bank debt financing, which are particularly relevant to mid-sized businesses and infrastructure projects.
The Investment Management Association (IMA) said in a press release that IMA and its members respond positively to UK government's exemption. IMA members intend to invest around £9 billion (US$14.1 billion) in UK private placements.
Welcoming this change to withholding tax, Daniel Godfrey, Chief Executive of the IMA, stated:
"This measure, announced yesterday in the Autumn Statement, is a significant boost to the development of the UK private placement market - unlocking crucial capital for UK businesses."
"The IMA's members are major investors in UK businesses and infrastructure; having worked closely with members, we can announce that over the next five years Allianz Global Investors, Aviva, Friends Life, Legal & General, Prudential and Standard Life intend to make investments of around £9 billion in private placements and other direct lending to UK companies."
The Chancellor of the Exchequer, George Osborne, said:
"This is great news. Our long term economic plan is all about attracting investment to the UK, getting credit to businesses and helping them grow. Today, all three get a boost. This also signals the potential beginnings of an enduring private placement market for the first time in the UK."
The details on which private placements would qualify for exemption is scheduled to be released next week, it is expected that third-party funds and pension fund investors would also be exempt.
According to Standard & Poor's, UK private-placement issuers accounted for about 21 per cent of the global market at the end of October 2013.