TAX PAID BY UK HEDGE FUND INDUSTRY AT RECORD LEVELS

Date: Wednesday, February 11, 2015
Author: AIMA Press Release

London – 11 February 2015: The tax contribution of the UK hedge fund industry has never been greater than it is today, according to new research from AIMA, the global hedge fund industry body.

The hedge fund sector in the UK last year produced profits and income that have generated an estimated £4 billion in tax receipts to HM Revenue and Customs, up from about £1.7 billion in 2009, according to AIMA. The increase was due to the growth of the industry in the UK and recent changes to the tax system. AIMA added that it expects the tax take to further increase in 2015 as a result of changes to partnership tax rules that were introduced last year.

AIMA said £4 billion in tax receipts could pay for around a dozen new NHS hospitals.

The release of the data comes amid claims that hedge funds have received tax breaks or are exploiting loopholes, claims which AIMA disputes in a briefing note also released today.

In the briefing note, AIMA challenges a number of recent assertions:

·         A measure described as a “tax giveaway” worth £145m to the hedge fund industry 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. The UK hedge fund industry therefore did not benefit directly or indirectly from the repeal last year of this stamp tax.

·         Hedge funds are said to be exploiting a “loophole” to avoid paying stamp tax on UK share purchases.  There is not, and never has been, an exemption from stamp duty on equities transactions for hedge funds, which are liable to pay stamp duty on purchases of UK equities in the same way as other market participants. The use of derivatives to access exposure to UK equities is being described as a “loophole” since these kinds of derivatives are not taxed. This investment strategy has been employed for over two decades by all levels of investors in the UK stock market, not just hedge funds. Its removal would have very damaging consequences to the UK stock market and ordinary savers.

Jack Inglis, AIMA CEO, said: “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.

“Secondly, the proposal to impose stamp duty on certain derivatives transactions would impact all participants on the London Stock Exchange, from ordinary savers to large institutional investors. Financial transaction taxes always damage equities markets and this one, were it to be introduced, would undermine the competitiveness of the City of London and increase the cost of capital to ordinary British businesses.”

The AIMA briefing note is available on the AIMA website.

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Note to editors

The AIMA Briefing Note, Hedge Funds & UK Tax, can be downloaded here –

www.aima.org/en/document-summary/index.cfm/docid/BCB6C548-E558-4C02-AE257F7B4A5AE1FC

For media enquiries, please contact:

Dominic Tonner, Head of Communications, AIMA

Tel: +44 20 7822 8380

Email: dtonner@aima.org

About AIMA

The Alternative Investment Management Association (AIMA) is the global hedge fund industry association, with over 1,500 corporate members (and over 8,000 individual contacts) in over 50 countries. Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. AIMA’s manager members collectively manage more than $1.5 trillion in assets. All AIMA members benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals, and its excellent reputation with regulators worldwide. AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.