Alerts

UK Revenue Initiates Revision Of Hedge Fund Legislation

December 4, 2006

HM Revenue and Customs ("HMRC"), The UK Revenue Authority, Issues a Draft of a Revised Statement of Practice (The "New Draft SP") Setting Out Proposed Revised Guidance on the Application of the UK Investment Manager Exemption

The Investment Manager Exemption ("IME") is a statutory exemption which ensures that non UK-resident funds which have a UK investment manager are not subject to UK tax on their profits. Statement of Practice 1/01 ("SP 1/01"), which currently provides guidance on the application of the IME, was issued in 2001, before the recent substantial increase in UK hedge-fund manager activity and consequential market developments. The New Draft SP is intended to replace SP 1/01 and bring HMRC guidance (and the IME generally) up to speed with these industry developments. In addition to the New Draft SP, HMRC have issued an "open letter," which provides further background information on the New Draft SP and sets out a number of issues not addressed in the draft which are still under consideration. (References in this Alert to the New Draft SP include both references to the New Draft SP and the open letter.)