Although the Budget is light on tax measures which specifically relate to asset management, the funds industry will welcome the continued economic support for businesses suffering due to the Covid-19 pandemic and the longer term measures aiming to stimulate business investment.
In addition, measures to improve the anti-hybrids rules look set to go ahead (with some changes from the proposals announced in November (for more detail please click here) and these should ease (if not completely solve) several of the issues that have troubled the asset management industry since the regime was introduced in 2017. Given the state of the public finances, asset managers will probably be relatively unsurprised at the increase in corporation tax to 25% scheduled for 2023 and will be pleased that nothing was announced today in relation to increasing capital gains tax rates or tax on carried interest, albeit the industry will be keeping an eye out for possible developments in relation to both those issues.
The lack of specific focus in the Budget on asset management is likely to reflect the fact that the government is currently carrying out a review of the UK's fund regime. As part of this, a consultation on the design of a new tax privileged asset holding company regime has recently closed (and benefiting from such a regime will become even more important in light of the scheduled increase in corporation tax). Read our article on UK asset holding company proposals. In addition, we are in the middle of the period for interested parties to respond to a wide-ranging "call for input" on how to improve the UK funds regime and are expecting a review of the VAT treatment of fund management fees to start shortly. Further, today's publication of Lord Hill's UK Listing Review contains ideas that may be relevant to the development of UK funds sector. Therefore, as the government is considering what the UK funds landscape should look like in the longer term, it makes sense for it to have held off announcing piecemeal changes in the Budget.
As a final point to note, whilst not specifically aimed at fund managers, they, along with other financial institutions, will be disappointed at confirmation that the government will proceed with its "Financial Institution Notice" proposals despite strong criticism from the House of Lords. These notices will enable HMRC to more easily obtain information from financial institutions (including banks and fund managers) about their clients as they will no longer be required to get the approval of the taxpayer who is the subject of the information request or the tax tribunal. For more information on this measure please click here.
Return to Budget 2021.
Follow us on LinkedIn for updates from Travers Smith Tax.