Sector focus: Tax and the investment funds industry

The investment funds industry faces numerous challenges in the form of both UK and international tax initiatives, as well as ongoing regulatory developments. Some of the ongoing challenges relate to compensation and incentivisation arrangements, including: the introduction of the so-called salaried member rules; the new disguised fee rules; the proposed further changes to the UK taxation of ‘carried interest’; the proposals on non-dom rules; and the impact of the recent decision in Anson. Current considerations relating to tax efficiency of investment fund structures include, in particular, the impact of the OECD’s BEPS initiative; and increased challenges and costs arising from international exchange of information. There are two major US federal income tax developments which are relevant to the investment funds industry. Furthermore, a number of matters on the regulatory horizon may have a tangential impact on tax.