UK Tax – Changes to Taxation of Asset Manager Performance-Based Rewards

In his Autumn Statement delivered to Parliament on 25 November 2015, the Chancellor of the Exchequer announced that:

“The government will introduce legislation to determine when performance awards received by asset managers will be taxed as income or capital gains. An award will be subject to income tax, unless the underlying fund undertakes long term investment activity.”

Formal proposals for these changes will be introduced in the Spring in the Finance Bill 2016.

FCA launches Asset Management Market Study

The FCA launched its study into competition in the UK asset management industry on 18 November 2015 and published the terms of reference for the study.

The aim of the study is to examine whether competition is working effectively in the asset management sector to enable both retail and institutional investors to obtain value for money when purchasing asset management services.

The study’s main areas of focus will be:

• How asset managers compete to deliver value.
• Whether asset managers are motivated and able to control costs along the value chain; and
• What effect investment consultants have on competition for institutional asset management.

The regulator will also look at whether there are any barriers to innovation and/or technological advances in asset management.

Both retail and institutional investors will be taken into consideration.

The FCA invited submissions on the topics raised in the terms of reference by 18 December 2015. It intends to publish its interim report in summer 2016 with a final report in early 2017.

FCA Announces New UK Debt Market Forum

The FCA’s Acting Chief Executive, Tracy McDermott, announced on 3 November 2015 that the FCA would be creating and chairing a UK Debt Market Forum.

The announcement was mentioned in the context of the European Commission's action plan for capital markets union (CMU), and the need to assess the UK domestic market to ensure that it is able to support the wider aims of CMU.

According to Ms McDermott, the FCA is keen to explore, alongside industry, the effectiveness of the UK's primary markets. The forum would bring together a broad range of parties including industry, government and the FCA, and will look for practical measures to enhance primary debt markets in the UK.

HM Treasury Names High-Risk Jurisdictions for Money Laundering

HM Treasury issued an advisory notice on 23 October 2015 that UK entities subject to the Money Laundering Regulations 2007 should:

Consider the following jurisdictions to be high risk for the purposes of the Money Laundering Regulations 2007 and should apply enhanced due diligence measures in accordance with the risks:

• The Democratic People's Republic of Korea,
• Iran, and
• Myanmar.

Take appropriate actions in relation to the following jurisdictions to minimise the associated risks, which may include enhanced due diligence measures in high risk situations:

• Afghanistan,
• Algeria,
• Angola,
• Bosnia and Herzegovina,
• Guyana,
• Iraq,
• Lao PDR,
• Panama,
• Papua New Guinea,
• Syria,
• Uganda, and
• Yemen.

The advisory notice followed two statements of the Financial Action Task Force, which were annexed to the advisory notice.

HM Treasury Publishes Draft Technical Legislative Amendments for UCITS V

HM Treasury published a consultation on 23 October 2015, including a draft statutory instrument, on technical changes to the Financial Services and Markets Act 2000 and subordinate legislation required to implement UCITS V. The consultation closes on 17 December 2015.