VAT Could Hit Hedge Funds In U.K.

Jul 23 2010 | 12:03pm ET

More tax changes in the U.K. may make Europe’s largest hedge fund center even more unfriendly to hedge fund managers.

Britain has already seen some managers quit the jurisdiction to avoid its new 50% top income tax rate. But now, changes to the country’s value-added tax system could add another burden to hedge fund managers, two KPMG employees write in Hedge Funds Review.

While offshore hedge fund management fees have been taxable under the VAT regime, any VAT paid has been recoverable. But following a European Court of Justice ruling and changes in the hedge fund industry, that may no longer be the case.

After the court case, the VAT exemption was changed to cover offshore funds offered to U.K. retail investors—but the exemption doesn't cover those funds not actively marketed to British retail investors, like many hedge funds, although it isn’t clear how “retail investor” is to be defined under the new regime, according to KPMG’s Darren Mellor-Clark and Ed Murphy.

Those that are deemed available—and availability to high-net worth investors may be enough—may be restricted from recovering VAT incurred.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.