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UK Labour 'Off The Mark' On Hedge Fund Tax Claims

Friday, February 13, 2015

The Alternative Investment Management Association (AIMA) has said that the UK hedge fund industry's tax contribution to the UK Exchequer has never been greater.

According to AIMA, the hedge fund sector produced profits and income that generated an estimated GBP4bn (USD6.1bn) in tax receipts in 2014, up from GBP1.7bn in 2009.

AIMA explained that the increase has been the result of industry growth and recent changes to the tax system. The industry's contribution is expected to continue to rise in 2015 as a result of changes to partnership tax rules that were introduced last year.

AIMA has released its new report in response to claims that hedge funds receive tax breaks or exploit tax loopholes to reduce their tax liability, with the opposition Labour Party pledging to tackle tax avoidance among hedge funds in its election manifesto.

Responding to the party's plans, and discussing the issue of Schedule 19 stamp duty reserve tax in particular, AIMA said: "A measure, described as a 'tax giveaway' worth GBP145m to the hedge fund industry, in fact benefits UK authorized funds including unit trusts and open-ended investment companies. These investment vehicles are not hedge funds, nor are they permitted to adopt investment strategies of the sort used by hedge funds. The UK hedge fund industry therefore did not benefit, directly or indirectly, from the repeal last year of this stamp tax."

Addressing claims that hedge funds are exploiting a "loophole" to avoid the payment of stamp tax on UK share purchases, AIMA said: "There is not, and never has been, an exemption from stamp duty on equities transactions for hedge funds, which are liable to pay stamp duty on purchases of UK equities in the same way as other market participants. The use of derivatives to access exposure to UK equities is being described as a 'loophole' since these kinds of derivatives are not taxed. This investment strategy has been employed for over two decades by all levels of investors in the UK stock market, not just hedge funds. Its removal would have very damaging consequences to the UK stock market and ordinary savers."

Jack Inglis, AIMA CEO, commented: "Despite some of the recent highly publicized claims, it is clear that the tax contribution of the 500 firms and 40,000 people working in the hedge fund sector in Britain has actually increased to record levels in recent years."

"There has been some confusion over two different stamp tax regimes. The repeal of stamp duty payments on UK authorized unit trusts and open-ended investment companies last year benefits ordinary savers and pensioners and has nothing to do with hedge funds."

"Secondly, the proposal to impose stamp duty on certain derivatives transactions would impact all participants on the London Stock Exchange, from ordinary savers to large institutional investors. Financial transaction taxes always damage equities markets, and this one, were it to be introduced, would undermine the competitiveness of the City of London and increase the cost of capital to ordinary British businesses."

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Offshore Trusts Guide: Introduction

The History of Offshore Trusts
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What Future for the Trust?
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Offshore Trusts Guide: Jurisdictions

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British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
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British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

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Cyprus: Legal Framework and Formation Rules and Fees
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Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

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Guernsey: Legal Framework and Formation Rules and Fees
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Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
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Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
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Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
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Madeira: Legal Framework and Formation Rules and Fees

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Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

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Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
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Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

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Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

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