After numerous UK tax changes affecting asset managers over the past few years – not least the wholesale re-vamping of the tax treatment of carried interest and other fund participations for investment fund managers – the UK government’s budget last week (8 March 2017) was a relatively uneventful affair for those in the investment management sphere.

There were only a few new tax announcements affecting the sector. But this is against the backdrop of a number of new and complicated tax changes coming into force very soon or having just done so (e.g. restrictions on interest deductibility for corporation tax purposes, rules on hybrid mismatches, corporation tax carry forward loss relief changes and new rules on deemed domicile status for individuals who are long term UK residents or who were born in the UK) which UK companies and their owners will need to consider carefully (and probably take advice on).

The new announcements included:

  • Withholding tax on interest – treaty passport extension: The Double Tax Treaty Passport (“DTTP”) scheme is to be extended to “all types of overseas lenders and UK borrowers”. Previously this was restricted to overseas corporate lenders and UK corporate borrowers. We will need to see the detail of the proposal (to be published on 6 April 2017) to assess how useful these extensions will be, e.g. will the revised regime apply where there is a partnership borrower or even (as many have lobbied for) where there is a partnership lender? Hopefully they will extend the scheme to most UK borrowers.
  • Partnership tax consultation – proposals deferred: The response to HMRC’s consultation last year on the taxation of partnership profits was not published as promised in January 2017.  The budget documents confirm that this paper will be published in due course, together with “draft legislation to clarify and improve aspects of partnership taxation”. Although no specific timing is set out, there is a stated intention that any legislation would form part of next year’s Finance Bill. It is to be hoped that the proposals will enhance rather than detract from using UK partnerships as investment fund vehicles.
  • National insurance contributions (NICs) changes for the self-employed, including LLP members:  The proposed increase in Class 4 NICs for self-employed persons generated a lot of headlines in the mainstream press and has now reportedly been scrapped by the government. In any event, for high earning self-employed persons it would have only have had a marginal effect.

A quiet budget it may have been, but all the other recent and upcoming changes will make for a busy year from a tax perspective for asset managers.