Revenue faces clash over hedge funds
The Inland Revenue is holding up plans to give private investors access to a new class of authorised hedge funds.
City regulator, the Financial Services Authority, had been scheduled to approve the new funds in March meaning investment could take place from the beginning of the next tax year.
The FSA thought it had the support of the Revenue, which is under pressure to stop treating hedge funds as trading income.
This means they are taxed on a yearly basis and a second time when paid to investors.
However, the Revenue said it had had only ‘preliminary and informal’ contacts with the FSA and that no decision had been taken to go ahead with tax changes.
City insiders fear that unless the Revenue comes to a decision soon, the UK could lose its pre-eminent position in the European hedge fund sector.