HM Treasury's 'Review of the UK funds regime: A Call for Input' - key takeaways and next steps

17 February 2021


HM Treasury (HMT) published its 'Review of the UK Funds Regime: A Call for Input' (the Call for Input) on 26 January 2021. The Call for Input follows on from the Budget 2020, where the government announced it would carry out a review of the UK funds regime to enhance the UK's attractiveness as a location for asset management and funds (the Review). The government recognises that the UK is already a leading jurisdiction for portfolio management but that, in respect of fund administration, the asset management sector can be strengthened further by addressing some of the barriers to establishing and running funds within the UK. This is important given the size of the industry (1% of GDP) which generates significant tax revenues and employment and plays a vital role in economic growth by funding business at all stage of the life cycle.

The Call for Input sets out the objectives, scope and next steps for the Review. There is a separate review into Asset Holding Companies. In this insight, we explore the key areas upon which HMT is seeking views and note the possible areas for reform.

Objectives for the Review

The objectives of the Review are as follows:

  • identify options which can make the UK a more attractive place to set up, manage and administer funds;
  • support a broader range of investments, which are both more efficient and better suited to investors' needs;
  • enhance the UK's reputation for fund location and administration and open up opportunities for asset managers to sell UK funds internationally and grow assets under management in the UK;
  • support job creation throughout the UK by supporting the growth of fund administration clusters outside of  London and the South-East;
  • ensure the asset management sector fulfils its economic purpose by enabling  investors to meet their goals and by allocating capital to the economy; and
  • drive reform to provide for diversification of investment; enhance returns; drive post-COVID economic recovery; modernise infrastructure and transition to a carbon neutral economy.


The Call for Input asks for views on a range of issues, including:

  • the efficacy of recent reforms to UK funds taxation. The government considers that tax implications should not discourage investment through funds and has sought to ensure that the taxation of UK funds remains competitive
  • why take-up of Tax-Elected Funds (TEFs) has been limited;
  • why the number of registrations of UK-domiciled limited partnership funds (LPs) has declined over recent years, what the barriers to the use of UK domiciled LPs are and how tax changes may help address these;
  • the use of authorised funds and the efficiency of the funds authorisation process;
  • how to enhance the UK's attractiveness as a jurisdiction to establish new funds, and, in particular, Alternative Investment Funds;
  • how to encourage the development of geographically spread fund administration jobs;
  • potential reform of VAT on fund management services, given the current complex, administratively intensive and regularly litigated arrangements;
  • proposed improvements to the UK's double taxation treaty;
  • the introduction of a discrete set of taxation rules for partnerships, to simplify tax administration and create more certainty on taxation for fund managers and investors; and
  • other measures that could enhance the UK funds regime.

Possible areas for reform

HMT suggest a number of significant possible reforms, including in the following key areas:


  • Changes to tax rates applied to UK funds, including a low rate of tax to authorised funds;
  • deemed deductions for distributions at fund level and potential differential treatment for different types of income; and
  • possible extension of corporate streaming to individuals to allow individuals to claim credit for tax paid at fund level.


  • Simplifying rules relating to Real Estate Investment Trusts and Property Authorised Investment Funds.

Qualified Investors Schemes (QIS)

  • Making QIS more attractive, for example by removing requirements for distribution of income and allowing QISs to distribute capital and carry over income.

Fund Managers

  • Proposing alternatives to the current UK system where Authorised Fund Managers deal in units as principal with investors, to allow investors to transact directly with funds; and
  • proposals for asset managers to be required to justify why they have opted for a particular structure. Where a fund is investing in illiquid assets, this might help stabilise investment performance.

New fund structure proposals

  • Proposals for new funds structures which seek to fill gaps identified in the range of UK fund vehicles to address policy changes faced by the industry and seize opportunities presented by growing investor demand;
  • creation of a Long-Term Asset Fund (LTAF). The proposed LTAF will be an authorised open-ended fund structure, which would allow investors to more confidently invest in illiquid assets; and
  • proposals for unauthorised fund structures including the creation of new, flexible, tax-efficient unauthorised fund structures, designed for professional investors investing in alternative asset classes and investment strategies.

How to respond to the Call for Input

The government is inviting responses from all interested parties in this Call for Input and has assured respondents that any commercially sensitive information disclosed will be handled appropriately.

The deadline for submission of responses is 20 April 2021. Interested parties can submit a response by emailing:

Next steps

The government has said it will analyse responses to the Call for Input and will then consult on specific proposals for reform. It has clarified that it will prioritise measures which have greater impact and those that can be delivered quickly. Respondents are encouraged to detail areas which should be prioritised for reform and why.

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