Transactions in “designated crypto assets” made from the 2022-2023 fiscal year will be eligible for the UK Investment Manager Exemption. This legislation was announced by the UK government in April and is now being implemented by Her Majesty’s Revenue and Customs Commissioners (HMRC).
On Dec. 20, the HMRC published its legislation to define “designated crypto assets” and include them on the list of investment transactions eligible for the Investment Manager Exemption.
The regulation, which will enter into force on January 1, 2023, does not contain a positive definition of “designated crypto assets.” However, citing section 2 of the Investment Transactions (Tax) Regulations 2014, it refers in particular to the class of “investment transactions”. Therefore, the transaction for the provision of services in the period while the crypto asset is held by the non-UK resident will not be accounted for.
The Investment Manager Exemption (IME) serves the UK as a tool to reinforce the country’s status as a financial centre. It gives non-UK investors the right to appoint UK-based investment managers to carry out certain investment transactions on their behalf, without falling within the scope of UK taxation.
Thus, “designated crypto assets” will be equated to shares and other assets under the governance of UK funds, acting on behalf of non-UK investors. Such a measure was introduced as part of the Government’s FinTech Sector Strategy on April 4. As stated in the consultancy document:
“This will provide certainty of tax treatment to UK investment managers and their non-UK investors looking to include crypto assets within their portfolios, and we anticipate this will also encourage new crypto investment management companies to settle in the UK.
While the HMRC decision reflects the long-term strategy of the previous government, there are signs of height changes among British regulators. Ashley Alder, who will take over the UK’s Financial Conduct Authority (FCA), the country’s top financial regulator, recently told members of the Treasury that cryptocurrency-related companies were “deliberately evasive” and suggested that the sector facilitated money laundering.
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