The British government is planning to close tax loopholes that are used by hedge fund managers to avoid or defer income tax.
The UK Chancellor of Exchequer George Osborne, in the government’s Autumn Statement, confirmed that he would impose rules highlighted in May to prevent the misuse of partnership structures, reported Reuters.
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Some hedge funds that are structured as partnerships allowed the hedge fund managers to avoid or defer income tax.
The government’s move may encourage London-based hedge funds to relocate to low tax financial centers like Switzerland and Luxembourg, while some tax advisers anticipate that London may not see such migration.
Sigma Partnership senior partner Joe Seet told Reuters, "Hedge fund managers and investment firms who use Limited Liability Partnership structures will need to consider restructuring… (but) will this lead to managers leaving the UK? This is highly unlikely as London is still the preferred center for both managers and investors."
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