Category: Overseas Corporate tax issues

The Investment Manager Exemption (IME) is a long-standing HMRC concession that helps attract international investment in the UK. It allows overseas investors to appoint UK-based investment managers without automatically creating a UK tax liability for the investor.

Without the exemption, there is a risk that investment activities carried out by a UK manager on behalf of a non-resident investor could be treated as giving rise to a taxable presence in the UK. The IME helps prevent this outcome where certain conditions are met. 

The Investment Manager Exemption uses qualifying tests to make sure:

• overseas investors are not charged to UK tax for investment transactions conducted on their behalf; and
• any fees received by a UK resident investment manager for services performed for the non-resident are fully chargeable to UK tax.

The rules are designed to strike a balance between encouraging international investment into UK-managed funds whilst at the same time ensuring that UK-based investment managers remain fully taxable on their earnings. While the overseas investor may benefit from the IME, the fees earned by the UK investment manager are subject to tax in the normal way.

It is important that fund managers and overseas investors review their arrangements to ensure the qualifying tests are met otherwise this could have significant UK tax implications. 

An overseas company must register with Companies House if they want to set up a place of business in the UK. This would mean that the overseas company has some sort of physical presence in the UK through which it carries on business.

If an overseas company does not have a physical presence in the UK, then they are not usually required to register with Companies House. For example, an independent agent who conducts business on behalf of an overseas company is not seen as the overseas company having a physical presence in the UK, neither is an occasional location such as a hotel where a director of an overseas company may conduct business during periodic visits to the UK.

If the overseas company is required to register, then they must submit a completed OS IN01 form and pay the standard registration fee of £20 to Companies House. If the company is registering its first UK establishment, it must also send Companies House a certified copy of the company’s constitutional documents and a copy of the company’s latest set of accounts (with a certified translation in English if prepared in another language).

The overseas company can be registered using its corporate name (its name under the law of the country of incorporation), or an alternative name under which it proposes to carry-on business in the UK.