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ARTICLE · 05 JUNE 2026

Finalised Guidance On Reformed Investment Manager Exemption Published

Travers Smith LLP
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HMRC has published final guidance on the reformed UK investment manager exemption (IME), introducing significant changes that broaden its scope and remove the problematic 20% test. The updated guidance clarifies how the exemption applies to transparent funds and carried interest arrangements, providing crucial certainty for non-resident investors and UK asset managers navigating the country's tax regime.

United KingdomTax
Elena Rowlands
Elena Rowlands
Tom Margesson
Tom Margesson
Ian Zeider
Ian Zeider
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1. Background

The IME is a longstanding plank of the UK's tax regime. It is designed to support the UK investment management sector by giving comfort to non-resident investors that they will not be subject to UK tax on transactions, simply because they are conducted on their behalf by UK managers. In practice, the IME is more important for some strategies (such as hedge funds) rather than others. This is because it protects against tax charges on trading income, and, for many strategies (such as private equity and infrastructure), it is generally possible to get comfortable that the investor is not trading.    

The recent Finance Act 2026 contained a package of measures relating to international taxation, including an expansion of the UK's domestic law definition of "permanent establishment" - which is the level of presence in the UK typically needed to bring non-resident traders within the corporation tax net.  To allay concerns that this could adversely affect the asset management

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