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Last updated: 1 Jun 2022
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Investment manager exemption: investment transactions list to include cryptoassets

In a welcome move, HM Revenue & Customs (“HMRC”) has launched a consultation seeking to expand the investment transactions list (“ITL”), used by the investment manager exemption (“IME”), to include certain types of cryptoassets.

Where a non-UK resident fund is trading in the UK via an agent of dependent status, the profits of the fund attributable to the UK investment manager’s activity could be brought into the scope of UK taxation. 

The IME is a safe harbour where this risk is mitigated completely to the extent the transactions entered into are on the ITL and each of the IME’s conditions are met.

The IME has been a matter of government policy for over 20 years and is set out in Statement of Practice 1/01 (“SP1/01”).

The ITL has been expanded several times, but until now has not been updated to reflect the evolution of various cryptoassets as new asset classes.

HMRC is consulting on finally expanding the ITL to reflect certain types of cryptoassets.

The consultation recognises that 'cryptoassets' is an umbrella term that includes different types of crypto technologies, including for instance exchange tokens, utility tokens, security tokens, stablecoins, smart contracts and non-fungible tokens.

HMRC is considering adopting a definition for the ITL that is similar to that proposed by the Organisation for Economic Co-operation and Development (“OECD”) in the Crypto-Asset Reporting Framework published in March 2022.

The definition is subject to change, but currently reads:

“The term ‘cryptoasset’ refers to a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.”

HMRC recognise the breadth of the OECD’s proposed definition and wish to narrow down the definition to ensure the inclusion of cryptoassets on the ITL does not somehow circumvent existing exclusions from the ITL. HMRC gives specific examples in the consultation of:

  • “Transactions in and, including transactions of any nature which result in the acquisition of land; and
  • Cryptoassets that provide for the transfer of tangible assets or intangible assets not already included in the ITL”

HMRC goes further in the consultation to propose excluding closed loop cryptoassets from the expanded ITL.  

About the author

Antoine Housden

+44 (0)207 710 3121
housdena@buzzacott.co.uk
LinkedIn

Where a non-UK resident fund is trading in the UK via an agent of dependent status, the profits of the fund attributable to the UK investment manager’s activity could be brought into the scope of UK taxation. 

The IME is a safe harbour where this risk is mitigated completely to the extent the transactions entered into are on the ITL and each of the IME’s conditions are met.

The IME has been a matter of government policy for over 20 years and is set out in Statement of Practice 1/01 (“SP1/01”).

The ITL has been expanded several times, but until now has not been updated to reflect the evolution of various cryptoassets as new asset classes.

HMRC is consulting on finally expanding the ITL to reflect certain types of cryptoassets.

The consultation recognises that 'cryptoassets' is an umbrella term that includes different types of crypto technologies, including for instance exchange tokens, utility tokens, security tokens, stablecoins, smart contracts and non-fungible tokens.

HMRC is considering adopting a definition for the ITL that is similar to that proposed by the Organisation for Economic Co-operation and Development (“OECD”) in the Crypto-Asset Reporting Framework published in March 2022.

The definition is subject to change, but currently reads:

“The term ‘cryptoasset’ refers to a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.”

HMRC recognise the breadth of the OECD’s proposed definition and wish to narrow down the definition to ensure the inclusion of cryptoassets on the ITL does not somehow circumvent existing exclusions from the ITL. HMRC gives specific examples in the consultation of:

  • “Transactions in and, including transactions of any nature which result in the acquisition of land; and
  • Cryptoassets that provide for the transfer of tangible assets or intangible assets not already included in the ITL”

HMRC goes further in the consultation to propose excluding closed loop cryptoassets from the expanded ITL.  

Get in contact

Responses to the consultation are welcome until 18 July. 

Please get in contact with us if you would like to discuss HMRC’s consultation, the ITL or the IME.

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