On July 20, HM Revenue and Customs (HMRC) issued its revised Statement of Practice (SP) 1/01 Treatment of Investment Managers and their Overseas Clients which deals with the Investment Manager Exemption (IME). The IME provides an exemption from UK taxation for non-UK fundswith an investment manager based in the UK, provided that the manager is independent. The SP (first issued in 2001) explains HMRC practice with respect to IME’s qualifying conditions.

The general industry reaction to the revised SP is that it is an improvement on its predecessors. Indeed, HMRC has emphasized on page 1 of the revised SP that it is committed to maintaining a tax environment which enables non-residents to appoint UK based investment managers without the risk of liability to UK taxation, and to providing greater flexibility for investment managers and expanding the scope of exempt activities.