Global Hedge Fund Body Attacks UK Non Dom Proposals

by Robert Lee, Tax-News.com, London

05 March 2008

The Alternative Investment Management Association (AIMA), the global hedge fund industry body, has urged the UK government to reconsider planned measures to increase taxes for non-domiciled individuals.

In a letter responding to HM Treasury’s Consultation on Residence and Domicile, AIMA has argued that the measures could result in a reduction in overall UK tax revenues by causing non-UK domiciled hedge fund managers to relocate to other jurisdictions, and could deter others from setting up hedge funds in the UK.

Of the 83 UK hedge fund management firms that responded to a recent AIMA member survey, 77% confirmed that over half of their workforce (including employees, partners and directors) are non-UK domiciled, while 11% said that over three quarters of their workforce is non-UK domiciled. Over 60% of all respondents revealed that they would be affected by the changes.

The results have led AIMA to outline its concerns with regard to the government’s proposed levy. The Association has called on the Treasury to postpone the introduction of the measures outlined in the pre-budget report to allow for examination of the possible impact of the changes.

AIMA also argues that the contribution already made to the UK by nondomiciled hedge fund managers, and their families, far outweighs the additional GBP30,000 per capita which would be collected from those who remain in the UK to pay it.

"This presents a serious threat to the UK financial services industry and the UK economy as a whole,” warned Andrew Baker, Deputy Chief Executive of AIMA.

"Unfortunately, we believe that the proposed measures will cause these key people to re-assess their positions and potentially migrate to more favourable jurisdictions over the next 18 months or so. We urge HM Treasury to reconsider the measures and potential impact carefully and comprehensively."

"At the least, we ask that the introduction of the measures outlined be postponed, while full consideration of the impact and the detail is undertaken," he added.

London is now the premier location in Europe for hedge fund managers, with almost 80% of assets under management in Europe managed from the city.

According to AIMA, this success is due to the UK’s robust legal environment and regulatory regime, access to the best professional services and a tax system that is attractive to highly talented international individuals who want to conduct their specialist financial operations from London without putting their economic interests outside the UK at risk.

With these proposed changes, which are due to be introduced in April, AIMA concludes that the government is at risk of undoing "excellent work in other areas to encourage and sustain the hedge fund industry in the UK."

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