Legal support order form on setting up an private equity fund
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Registering a company in Great Britain & opening an account with a British bank is by far one of the most popular options for creating an international business. The reason why many businessmen wish to open their businesses in this jurisdiction is because it is not only one of the most prestigious in the world, but also offers favorable conditions for entrepreneurship.

In this article, we will be looking into taxation in Great Britain, and in particular, taxation of PEFs.

Tax Liability

Those intending to establish a PEF in Great Britain should should keep in mind this:

  • Funds established as ELPs are not regarded as separate entities liable to taxation;
  • No WHT exists as far as distribution among investors is concerned, while ELPs aren’t liable to income tax nor investment income tax.
  • Funds’ investors are regarded as individuals owning proportional shares in the funds’ profits which are determined as per agreements on distribution of profits.
  • British resident investors’ appropriations from funds are taxed according to their individual tax status.

How Non-UK Investors are Taxed 

If the fund isn’t involved trading activities, non-UK investors’ proportionate share of the fund’s profits shall not be taxed. However, if an investor who is not a resident of Great Britain retains their share in the fund for trading in Great Britain through a subsidiary or otherwise, such activities are liable to taxation.

Non-UK investors must pay CGT in Great Britain or corporate income tax on land & immovable property, including shares in other companies. 

Those considering registering a fund in Great Britain should bear in mind this:

  • Under DTA between their home countries & Great Britain, Investors residing outside Great Britain may receive tax deductions;
  • Funds may be required to file a tax return on partnerships in Great Britain, and non-UK investors might have to provide fund-related information & register it with British tax authorities;
  • Partnerships that were registered in 2018-2019 do not have to submit a tax certificate unless they’re subject to taxation in Great Britain, or were engaged in trading or other business activities within the said period. Partnerships are also expected to furnish information on partners in this period as per international modes of providing information.

British Tax Authorities

Entrepreneurs intending to set up a PEF in Great Britain do not have to register them with HMRC. No special rules apply to such funds’ investors, either. However, the British government has rules in place aimed at taxing interested parties and those providing services related to investment management for the funds.

Other Taxation-Related Considerations

All taxable profit received by non-UK residents is now regarded as such that is received from the same source, providing these persons are engaged in the provision of services related to investment management.

According to the recently updated rules on profit-based interest rates, interest arising from or after 2016 is liable to preferential treatment of CGT if AWHP of an investment is in excess of forty months.

If AWHP doesn’t exceed thirty six months, interest is payable on income tax in Great Britain, including contributions of sole entrepreneurs. 

Help of lawyers

Considering registering a PEF in Great Britain? Looking to open an bank account in England? IQ Decision is at your service.