Changes to the UK Tax Residence Rules for AIFs and Pitfalls to Avoid

September 29, 2014

Draft legislation was published in 2013, to extend the scope of section 363A of the Taxation (International and Other Provisions) Act 2010 to ensure that alternative investment funds established in a foreign country or territory could not be resident in the UK for UK tax purposes. Subject to certain minor amendments, that draft legislation was enacted in July 2014 and has retroactive effect from 5 December 2013. The measure is undoubtedly a positive step for the UK fund industry. However, it needs to be applied with suitable caution. In particular, the legislation does not give offshore funds carte blanche to hold board meetings in the UK or to appoint additional UK directors.

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