UK investors are missing out on more than £1 billion through failing to reclaim tax on income from cross-border securities, according to a new report from GOAL Group.

GOAL said income earned on cross-border securities is subjected to withholding tax in the country of origin, but a portion of that tax may be reclaimed by custodians on behalf of their clients.

However, the company said that worldwide around 25% of reclaimable withholding tax lies unreclaimed in foreign tax systems every year, and pointed to a “clear opportunity” for custodians to increase the scope and efficiency of reclamation services.

The UK was second only to the United States in terms of unreclaimed tax. According to the report, US investors had £1.9 billion in unreclaimed tax outstanding last year, while the figure sat at more than £10.5 billion worldwide.

GOAL chief executive Stephen Everard said that as investors increasingly adopt global strategies a “substantial proportion” of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.

“All players in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. Technology is widely available today to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate varying data, formats and procedures from a multiplicity of different legislatures around the globe. So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,” Everard said.

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