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AIMA welcomes HM Treasury's offshore funds draft regulations

Posted: 15 July 2008

The Alternative Investment Management Association, (AIMA), the global representative association for the hedge fund industry, has broadly welcomed HM Treasury's partial draft regulations on offshore funds in the association's formal response to the Treasury's consultation paper.

In the submission made on the 11th July 2008, AIMA has welcomed many of the draft regulations, which go some way towards simplifying the existing tax regime and providing more certainty to UK investors and funds.

AIMA has also endorsed the following developments by HM Treasury: the inclusion of accumulation funds; the abolition of the 5% investment test; and the introduction of flexibility to allow three breaches in ten years.

However, AIMA holds the view that the proposals will not reduce the administrative complexity of the existing regime, and could increase costs and create other difficulties for investment managers and investors.

In its submission, AIMA has urged HM Treasury to make known as soon as possible all proposed changes to the offshore funds regime, particularly in relation to the impact of the new regime on the ongoing development of Funds of Alternative Investment Funds (FAIFs). For AIMA to be in a position to make a completely informed evaluation of the proposals, the full draft regulations are required.

AIMA notes that further draft regulations are expected from HM Treasury on these matters: distinguishing between capital and income; the period to which the new regulations will apply; giving clarification as to what measures may be available in managing the transition from draft to new regulations; and outlining the proposed amendment to the definition of "offshore fund" in the Finance Bill 2009.

Andrew Baker, Deputy Chief Executive of AIMA, commented:

"We regard HM Treasury's proposals for a new offshore funds regime as a step towards achieving a more efficient regime, but feel the changes fall short of the objective of creating certainty for investors and funds. AIMA has made its recommendations to HM Treasury with the intention of achieving the most effective and flexible system to the ultimate benefit of fund managers and their investors."

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