Investment Manager Exemption meaning

At an oral session of the Committee, Charlotte Clark CBE, Director of Cross-cutting Policy and Strategy at the FCA, said that secondary legislation is required to give greater clarity on the steps trustees must take to justify declining a mandated investment, as well as on regulatory rules that would need very careful design. The Pension Schemes Bill provides an exemption that permits trustees to refuse mandated investments if they consider this not in members’ interests, but Clark cautioned that this would be a difficult judgement for trustees and scheme managers, and just as challenging for regulators to evaluate thoroughly. She said the extent of that process would be set out in secondary legislation, and that it must spell out what the process involves. It is going to be a demanding assessment for the trustees or scheme manager, and then for the regulators. Clark stressed the importance of industry consultation to decide how mandation and exemptions should operate in practice. She also noted that the FCA would need to determine what...

Stop Press: Section 49 and Schedule 7 of the Finance Act 2026 revise the UK’s domestic rules on UK permanent establishments of non-UK companies, applying to accounting periods (for corporation tax) and tax years (for income tax) that start on or after 1 January 2026. The measures update both the definition of a UK permanent establishment and the methodology for attributing profits to a UK permanent establishment, each intended to align more closely with the OECD Model Tax Convention. They also adjust how the investment manager exemption operates. For further details, see News Analysis: Budget 2025—Tax analysis — International. A non-UK resident company trading in the UK may either incorporate a UK subsidiary or trade through a permanent establishment (PE), commonly a branch. This Practice Note sets out the key UK tax considerations relevant to that choice, while recognising that tax is only one of several matters to be weighed...

STOP PRESS: On 28 April 2025, the UK government released draft changes to domestic tax legislation to refresh the rules on permanent establishments (PE) and to update the Investment Manager Exemption (IME). Stemming from a 2023 consultation and wide-ranging dialogue with industry participants, the proposals acknowledge that elements of the UK’s PE and IME regimes—now more than two decades old—no longer align with the practicalities of today’s asset management landscape. Comments on the consultation are sought by 7 July 2025. For further details, see: Open consultation: Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax. The core aim of the investment manager exemption (IME) is to ensure a UK-based investment manager (IM) is not treated as a branch or agent of a non-resident client when executing investment trades for that client. Absent the IME, where the client is an individual or a trust, that client could be liable to income tax and capital gains tax (CGT) on the resulting profits. The IME was...

Practice Note: Tax and hedge funds—structuring the hedge fund vehicle When shaping how a hedge fund’s investment management should be arranged, the choice of legal vehicle for the fund itself—and, in particular, where it is formed—matters greatly. As discussed in Practice Note: Tax and hedge funds—structuring the hedge fund vehicle, a hedge fund vehicle can, in practice, adopt one of these structures: a Cayman Islands company a limited partnership an entity set up in another low (non-EU) tax jurisdiction (eg the Channel Islands, British Virgin Islands or Bermuda), or an entity or structure created under a special tax exemption regime in an EU or OECD member country (eg a Luxembourg SICAV or an Irish OEIC) This Practice Note explores the key tax issues when deciding how to organise the management of the fund’s investments. For these purposes, it is assumed that management is undertaken from the UK, which continues to be the centre of the European hedge fund industry. In...