Using arrangements involving partnerships and other vehicles, investment managers have been able to structure part of their fee income so that it is subject to capital gains tax rather than income tax.
The Government has announced that it will introduce legislation, effective from 6 April 2015 to ensure that any disguised guaranteed fee income received by investment fund managers will be subject to income tax.
Once the draft legislation is available, investment fund managers will need to carefully review whether their remuneration structures will be caught. Current speculation is that these new rules will not affect sums related to performance, so called “carried interest” structures or returns which are exclusively from investments by partners. However this will need to be looked at in detail once the legislation is available.