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Aima welcomes UK offshore fund draft regulations with reservations

The London-based Alternative Investment Management Association has broadly welcomed the UK Treasury’s partial draft regulations on offshore funds, but it fears that the proposals will fail

The London-based Alternative Investment Management Association has broadly welcomed the UK Treasury’s partial draft regulations on offshore funds, but it fears that the proposals will fail to reduce the administrative complexity of the existing regime.

In its formal response to the Treasury’s consultation paper last week, the hedge fund industry body expressed its satisfaction with many aspects of the draft regulations, which it says go some way toward simplifying the existing tax regime and providing more certainty to UK investors and funds.

Aima has endorsed the Treasury’s proposals to include accumulation funds, abolish the 5 per cent investment test, and introduce flexibility by allowing three breaches in 10 years. However, the association says the failure to tackle administrative complexity could increase costs and create other difficulties for investment managers and investors.

In its submission, Aima has urged the Treasury to make known as soon as possible all proposed changes to the offshore funds regime, particularly in relation to the impact of the new regime on the ongoing development of funds of alternative investment funds. The association says it needs the full draft regulations to be in a position to make a completely informed evaluation of the proposals.

It notes that further draft regulations are expected on issues including distinguishing between capital and income, the period to which the new regulations will apply, clarifying what measures may be available to manage the transition from draft to new regulations, and outlining the proposed amendment to the definition of ‘offshore fund’ in the 2009 Finance Bill.

‘We regard the proposals for a new offshore funds regime as a step toward achieving a more efficient regime, but feel the changes fall short of the objective of creating certainty for investors and funds,’ says Aima deputy chief executive Andrew Baker.

‘Aima has made its recommendations to HM Treasury with the intention of achieving the most effective and flexible system to the ultimate benefit of fund managers and their investors.’

Aima has more than 1,280 corporate members in 47 countries including hedge fund managers, fund of hedge funds managers, prime brokers, providers of legal and accounting services and fund administrators.

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