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Aima says most UK hedge fund managers are affected by non-domicile tax changes

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The Alternative Investment Management Association, the global hedge fund industry body, has urged the UK government to reconsider its planned measures to increase taxes for non-domiciled i

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

In a letter responding to the UK Treasury’s Consultation on Residence and Domicile, Aima argues that the measures could diminish overall UK tax revenues by causing non-UK domiciled hedge fund managers to relocate to other jurisdictions, and put others off carrying out management of hedge funds from the UK.

Of the 83 UK hedge fund management firms responding to an Aima member survey over the past week, 77 per cent reported that more than half of their workforce (including employees, partners and directors) are non-UK domiciled, while 11 per cent said that more than three-quarters of their workforce is non-UK domiciled. More than 60 per cent of all respondents said they would be affected by the changes.

Aima is urging that the introduction of the measures outlined in last autumn’s Pre-Budget Report and embodied in draft legislation be postponed to allow for further reflection on the impact of the proposed changes, and to ensure the detail is right.

The association says it is likely that the contribution already made to the UK by non-domiciled hedge fund managers and their families far outweighs the additional GBP30,000 per capita that 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,’ says Aima deputy chief executive Andrew Baker. ‘Unfortunately, we believe that the proposed measures will cause these key people to reassess their positions and potentially migrate to more favourable jurisdictions over the next 18 months or so.

‘We urge the 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.’

Aima notes that London is by far the premier location in Europe for hedge fund managers, according for almost 80 per cent of assets managed in Europe. It argues that this is due to the UK’s robust legal environment and regulatory regime, access to the best professional services, and a tax system attractive to talented individuals who want to conduct their specialist operations from London in the knowledge that their economic interests outside the UK are not put at risk in doing so.

Aima believes that the proposed measures, which are currently scheduled to be introduced in April, risk ‘undoing the government’s excellent work in other areas to encourage and sustain the hedge fund industry in the UK’.

Aima has more than 1,280 corporate members in 49 countries, including managers of hedge funds and funds of hedge funds, prime brokers, providers of legal and accounting services and fund administrators. The association is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation, the specialised educational standard for alternative investment professionals.

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