IMA Welcomes Clarification Of UK IME Exemption

by Jason Gorringe, Tax-News.com, London

25 July 2007

The UK Investment Management Association (IMA) has welcomed a clarification by HM Revenue and Customs in the trading versus investment debate, for tax purposes.

In its Revised Statement of Practice (SP) in respect of the Investment Manager Exemption (IME), HMRC has clarified that active management alone should not be taken to constitute a trade.

More specifically, neither "shorting" nor the use of derivatives are to be taken as indicative of trading, and so can be treated as "investing" for tax purposes.

The IME enables UK-based investment managers to provide advisory and management services to non-UK funds without the funds incurring UK tax. It is therefore critical to the UK as an export base for investment management services, the IMA argued.

Julie Patterson, Director of Regulation, Operation and Taxation at the IMA commented:

"The investment manager exemption is an important feature in maintaining the UK's competitiveness in financial services. HMRC's consultative approach has been positive and the revised SP provides a sensible framework going forward."

She continued: "We welcome, in particular, HMRC's willingness to listen to business concerns and to seek to reflect modern investment practices."

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