LONDON (Reuters) - The British government said it plans to close tax loopholes used by hedge fund managers as it seeks to show it is forcing the rich to share the burden of tough austerity measures.
As part of the government’s Autumn Statement, Chancellor George Osborne confirmed he would impose rules flagged in May to clamp down on the abuse of partnership structures.
A Treasury spokeswoman said some hedge funds were structured as partnerships which included corporate partners, and that this allowed the companies owners, usually the hedge fund managers themselves, to avoid or defer some income tax.
Some tax advisers said the move could encourage hedge funds to relocate to low tax rivals like Switzerland and Luxembourg, although with European Union pressure building on them to stop helping companies and individuals shield income from tax, others said London was unlikely to see such an exodus.
Robert Mellor, asset management partner at accountants PwC, said the government’s decision was “disappointing”. But Joe Seet, senior partner at business advisory and compliance accounting firm Sigma Partnership, played down the impact.
“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 centre for both managers and investors.”
Reporting by Simon Jessop and Tom Bergin; Editing by Mark Heinrich