The Alternative Investment Management Association (AIMA), has welcomed the HMRC's response in the consultation exercise on changes to UK's Investment Manager Exemption (IME). The Alternative Investment Management Association (AIMA), has welcomed the HMRC's response in the consultation exercise on changes to UK's Investment Manager Exemption (IME).

The IME plays an important role in the UK hedge fund industry as it enables offshore funds trading in the UK in certain investments and with a UK investment manager to be largely exempt from UK taxation - which in turn allows UK investment managers to be globally competitive.

A key concern of managers has been certainty that they meet IME conditions and the HMRC is now taking steps to address that concern.

Key points are:

• A hierarchy of tests will provide certainty on the independent capacity test
• Explanation will be given as to how customary remuneration is quantified and how it interacts with transfer pricing
• Clarification as to the treatment of certain transactions will be provided
• Legislative treatment of non-qualifying transactions will be reviewed, and confirmation will be given that  minor or inadvertent participation in non-qualifying transactions will not mean that the IME is failed
• HMRC will give a manager due notice of any concerns about IME compliance and the opportunity to take corrective action before any assessment is raised on the fund.

Commenting on the new proposals, AIMA's Director, Mary Richardson said, 'AIMA considers these proposals as generally most encouraging. HMRC have clearly taken the industry's views into account and are now taking steps to address important concerns raised. AIMA looks forward to the revised draft Statement of Practice, due by 30 June 2007, and will continue its dialogue with HMRC as the revised SP takes shape.'