United Kingdom Budget - Proposals Affecting Asset Management Industry

The Chancellor delivered his 2013 UK Budget yesterday. A few items were announced that are of interest to the international fund and asset management industry, and this note summarises those proposals.

Limited Partnerships

The Government will consult with a view toward making technical changes to the Limited Partnerships Act 1907 as it applies to funds, including the possibility of allowing UK limited partnerships ("LPs") to elect for legal personality. This has long been a concern to private equity and venture capital groups. If such a change were introduced, it would increase the attractiveness of the UK as a jurisdiction in which to base a fund, and possibly also to base fund feeder vehicles, such as carried interest special limited partnerships.

At present, English LPs do not have legal personality, so they cannot, for example, be a partner in another partnership in their own name. In addition, it is becoming increasingly important to certain foreign investors to have access to a fund vehicle that is tax transparent and that possesses legal personality. Scottish LPs do have legal personality, and are widely used for both these purposes.

If the concept of elective legal personality is introduced, it is assumed, although not certain, that this will apply to all UK LPs (English and Scottish) and will thus provide much greater flexibility. It is not clear yet whether the scope of the consultation will extend to partnerships that are not used as main fund vehicles, such as feeder funds and carry vehicles, but we shall monitor the consultation.

This sort of change would make the UK competitive with Guernsey and Jersey, where an elective regime for legal personality of LPs has been in place for some time. The advantage for the UK, of course, is that it is a core EU jurisdiction, which may be more attractive to certain foreign investors.

Extension to White List

The Government will also consult on minor changes to the "white list" of transactions that are not generally treated as "trading" in nature when carried on by offshore funds. In particular, the changes will focus on transactions in traded life policy investments and certain forms of carbon credit.

UK Bond Funds

The government will develop proposals and consult with industry on a proposal to...