UK includes crypto investments as part of investment manager exemption

Transactions of “designated crypto assets” entered into from tax year 2022 to 2023 will qualify for the UK investment manager exemption. Some laws were announced by the UK government in April and are now enforced by Her Majesty’s Commissioners for Revenue and Customs (HMRC).

On December 20, HMRC published its legislation to define “designated crypto assets” and include them in the list of investment transactions eligible for the investment manager’s exemption.

The regulation, which will come into effect 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”. Thus, the transaction for the provision of services during the period that the crypto asset is held by the non-UK resident will not be counted.

The Investment Manager Exemption (IME) serves the UK as a tool to reinforce the country’s status as a financial hub. It gives non-UK resident investors the right to appoint UK-based investment managers to carry out certain investment transactions on their behalf, without bringing them within the scope of UK taxation.

Related: UK Advances Crypto Efforts Through Financial Services Reforms

Thus, “designated crypto-assets” will be assimilated 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 the advice document States:

“This will provide certainty of tax treatment for UK investment managers and their non-UK resident investors looking to include crypto-assets in their portfolios, and we expect it will also encourage new crypto investment management businesses. -active to settle in the UK”

As HMRC’s decision reflects the previous government’s long-term strategy, there are signs of a change of altitude among UK regulators. Ashley Alder, who will take control of the UK’s Financial Conduct Authority (FCA), the country’s main financial regulator, recently told the members of the treasury that cryptocurrency-related companies were “deliberately evasive” and suggested the industry facilitated money laundering.