UK hedge fund taxation at record levels

In a week where tax avoidance has dominated the press, UK hedge funds have shown that they have paid their due to the Exchequer, contributing £4 billion (€5.4 billion) according to research

from Aima, a hedge fund trade association.

According to Aima, this dispels the myth that hedge funds use tax breaks and loopholes to avoid taxation.

Some of these publicised avoidance tactics include a “tax giveaway” of £145 million (€196 million) to the hedge fund industry which, in fact, benefits UK authorised 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, according to Aima.

Another apparent myth about hedge funds is that they use a loophole to avoid paying stamp tax on UK share purchases. Aima does say that the use of derivatives to access exposure to UK equities is not taxed but this investment strategy has been employed for over two decades by all levels of investors in the UK stock market, not just hedge funds.

The amount of tax is more than double paid in 2009, the increase being due to the growth of the industry in the UK and recent changes to the tax system. Aima expects the tax take to increase in 2015 due changes in partnership tax rules that were introduced last year.

Jack Inglis, chief executive officer of the hedge fund body, says: “Despite some of the recent highly publicised 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 authorised unit trusts and open-ended investment companies last year benefits ordinary savers and pensioners and has nothing to do with hedge funds.”

©2015 funds europe

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