Fund Managers’ Tax Practices Under Scrutiny

Chancellor George Osborne delivers his Autumn Statement to parliament yesterday.UK-based fund managers have been targeted in the latest tax avoidance clampdown by Chancellor George Osborne.

The measures are designed to prevent individuals from claiming regular or “guaranteed” elements of their remuneration as capital gains, rather than income, and so paying less tax. This can include share schemes or other regular payments other than cash or performance-related bonuses.

According to the UK Treasury’s estimates, this clampdown will raise £160 million in tax in 2016-17, and £80 million in 2017-18.

Osborne made the announcement on Wednesday as part of his Autumn Statement, a “mini-Budget” designed to provide an update on the economic and fiscal position of the UK. It was also the chancellor’s final opportunity to update fiscal, economic, and tax policy before the general election in May.

The document accompanying Osborne’s statement said legislation would be introduced from April 6, the start of the next fiscal year, “to ensure that sums which arise to investment fund managers for their services are charged to income tax”.

“It will affect sums which arise to managers who have entered into arrangements involving partnerships or other transparent vehicles, but not sums linked to performance, often described as ‘carried interest’, nor returns which are exclusively from investments by partners,” the document stated.

In the main UK Budget statement in March, Osborne unveiled a major overhaul of pension rights including scrapping the requirement for an individual to buy an annuity with a defined contribution pension pot.

The Autumn Statement can be read on HM Treasury’s website.

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