HM Treasury’s response to the ‘Review of the UK Funds Regime: A Call for Input’

HM Treasury (“HMT”) published its ‘Review of the UK Funds Regime: A Call for Input’ (“the Review”) in January 2021. The key objectives of the Review were to look at options to boost the UK’s competitiveness as a location for asset managers and investment funds, and to support investments which were greater aligned to investors’ requirements.  Please refer to our January 2021 edition of the A&M Taxand Scotland Asset Managers Briefing Note for further information.

HMT issued a response to the Review in February 2022. We have summarised the main points included in HMT response here.

New tax regime for Qualifying Asset Holding Companies – update  

The legislation for this new tax regime including HM Revenue & Customs (“HMRC”) guidance has recently been published (found here), and a lot of interest is generated amongst clients for their existing and future fund structures.

Further to the initial release of the HMRC guidance, HMRC has clarified that some activities, especially related to credit strategies, should not, be considered trading which provides comfort to credit funds (and others). It is critical in order for an asset holding company (“AHC”) to fall within the regime that trading activities of the company must not be both ancillary to the company’s main investment business and not substantial.  

It is set out in the guidance where an AHC originates a debt investment, rather than acquiring debt on the secondary market, this does not indicate trading. 

HMRC also mentions fees – if a fund invests in loans, fee income originating from or on holding of these loans including execution, origination or participation fees, should be investment income. However, HMRC does clarify that fees for the arrangement of loans for others to hold i.e. syndication fees, are likely to be the result of trading activity.

A&M is here to work with you closely and can provide assistance in dealing with enquiries related to the new regime including, but not limited to the following: 

• Reviewing the tax implications of your current or future fund structure and assessing whether there would be any impact if the relevant company/ companies are relocated to the UK under the new regime. 
• Assisting with meeting the eligibility requirements to be a QAHC.
• Developing tax and reporting compliant approaches in relation to your current or future fund structures under the new regime or outside of it. 

If you would like to discuss any of the above please feel free to get in touch with us.

Second self-assessment payment on account reminder for 31 July 2022

We wanted to provide a reminder that the second self-assessment payment on account for tax year 2021/22 is due by 31 July 2022. 

Taxpayers can pay this by:

• Debit Card by going to 'Pay-self assessment tax bill' and following the guidance; or 
• Phone/internet banking or Cheque.

Employment Related Securities reporting reminder for 6 July 2022

We want to provide a further reminder that, following the end of the 2021/22 UK tax year, asset managers that awarded carried interest and co-investment entitlements may have needed to report these awards on the ERS annual return. 

As a reminder, the ERS annual return involves a number of key tasks, including:

• Registering new plans or arrangements;
• Verifying or self-certifying the tax-advantaged plans in place; and
• Submitting annual returns with all reportable events (including nil returns).

All ERS annual returns should have been filed with HM Revenue and Customs by 6 July 2022 for 2021/22 tax year. 

Please note that late filings should result in an automatic penalty and potentially significant consequences for tax-advantaged plans.

If you need any assistance or if you are unsure whether you are required to file an ERS annual return for 2021/22, please do not hesitate to get in touch.