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The changing tax environment for the UK hedge fund sector

Dana Ward (International and financial services tax partner, Grant Thornton UK LLP, London, UK)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 14 March 2008




The purpose of this paper is to summarize the main conditions that a UK investment manager has to meet in order to benefit from a UK tax exemption known as the Investment Manager Exemption (IME) and comment on the key developments introduced in the revised Statement of Practice.


Provides background explaining legislation that defines the IME and its Qualifying Conditions and then goes on to explain the impact of the revised Statement of Practice


The IME is an exemption for non‐residents trading in certain investments in the UK where that trade is carried on through an investment manager. The IME was introduced in order to promote investment activities in the UK by providing some degree of certainty on the tax treatment of UK managers who manage offshore trading funds. The original Statement of Practice 01/2001 (SP 01/01) was issued by HMRC to provide guidance on the application of the legislation and, more specifically, on how the conditions in relation to the IME are satisfied. The policy aims of the revised Statement of Practice are to improve the IME and also to meet new developments in the investment management industry, thus providing more certainty in relation to the scope and application of the rules.

Practical implications

It is critical that processes are in place to demonstrate satisfaction of the Qualifying Conditions for the tax exemption; and in particular, contemporaneous and detailed transfer pricing documentation needs to be in place for all but the simplest of structures.


Practical guidance from a tax partner of a leading accounting firm.



Ward, D. (2008), "The changing tax environment for the UK hedge fund sector", Journal of Investment Compliance, Vol. 9 No. 1, pp. 24-29.



Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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