The UK General Election is only a few days away. The main parties have now published their manifestos and their potential impact on the UK asset management sector is worth a closer look from a domestic tax perspective.


Labour's 2019 manifesto and related documents focuses on taxing "those at the top" and "asks… for a little more from those with the broadest shoulders" to fund infrastructure and public services. A good example of this is the proposed changes to income tax thresholds: additional rate (80%) payable from  GBP 80,000 and new “super-rich” rate (50%) payable from GBP 125,000. In addition, most capital gains and dividends received by individuals will be taxed as income , and the lower income tax rate for dividends will be abolished. Although the manifesto is silent on the tax treatment of individual fund managers and their remuneration, carried interest may end up be taxed at the above income tax rates . Separately, a levy on companies paying employment income above certain thresholds will be introduced.

More generally, the Labour Government would seek to implement the unitary taxation of multinational groups, which means that profits could be recognised where economic activity is located and where value is created. In the context of hedge and PE funds, the Labour Fair Tax Programme provides that "profit fragmentation schemes allow UK hedge fund and private equity managers to divert profits to an offshore entity where little or no tax is paid". As a result, profits from the asset management business could end up being fully taxed where managers perform their services, ignoring any intra-group arrangements (such as those involving non-UK general partners).

Corporation tax rates will gradually increase to 21% for small companies and 26% for large companies (in addition to surcharge for any tax profits in a banking group). In addition, individuals earning over GBP 1 million and large companies will be required to publish their tax returns.

The Labour Government would also launch a 12-month inquiry into the UK finance sector, which would "tackle practices that have caused public concern; the role played by participants in the finance sector, including hedge funds and private equity…" Amongst other changes:

  • this could result in de-recognition of the Channel Islands from the list of recognised stock exchanges for the purposes of the Quoted Eurobond Exemption and an introduction of a UK withholding tax for payments to tax havens (similar to withholding tax rules in France);

  • stamp duty reserve tax (which is currently due on arrangements to transfer chargeable securities for consideration) will be extended to, in particular, equity and credit derivatives, as well as corporate bonds. Duty will be levied at different rates depending on whether the party to a transaction is a financial services firm;

  • the market maker exemption will be abolished; and 

  • bank levy may be revisited.

Labour also promise to conduct "a review of corporate tax reliefs " on the basis that the costs of some of these reliefs are prohibitive and that a high proportion of them are opaque. In this regard, entrepreneurs' relief (which provides that UK capital gains on disposal of shares is subject to tax at 10% up to GBP 10 million of gains, as opposed to 20%) will be replaced with “a better form of support for entrepreneurs”. The full terms of the review will be published within one month of Labour entering office. It is also possible that UK tax reliefs under (Seed) Enterprise Investment Scheme and Venture Capital Trust rules could be affected.

The non-dom regime will be abolished and the recent cuts to inheritance tax may be revisited.

More generally, it is also worth considering whether Labour’s non-tax policies could have an impact on the asset management sector; for example, whether returns from investments may be affected:

  • by the proposed nationalisation plans; or

  • as a result of requiring large companies to set up Inclusive Ownership Funds which would allow their employees to own up to 10% of the companies.


In comparison to Labour, the Conservative manifesto is somewhat uneventful. The Tories are proposing fewer amendments to the UK tax system and their policy is generally more focused on non-tax issues (the slogan "get Brexit done" and its iterations appear on most pages).

The Conservative Government aims to use the "freedom from the EU to improve the UK’s tax regime". In this regard, the following has been noted:

  • there would be no increases in income tax, NICs or VAT over the next five years (although the corporation tax rate will stay as 19% and will not reduce to 17%);

  • the tax credit rate would be increased to 13% and the definition of R&D would be reviewed; and

  • business rates would be reduced.

The manifesto also talks about redesigning "the tax system to… limit arbitrary tax advantages for the wealthiest in society". Details are scarce but this could include further changes to carried interest taxation.

Similar to Labour, the Tories propose to review entrepreneur's relief and introduce a package of new anti-tax avoidance and evasion rules.

Liberal Democrats

The Liberal Democrats lead with their slogan "Stop Brexit. Build a brighter future". They suggest that "the taxation system is unbalanced and unfair: it is too easy for tech giants and large monopolies to avoid tax and income from employment is taxed more harshly than income generated by wealth". As a result, they seek to:

  • restore the corporation tax rate to 20%;

  • like Labour and the Conservatives, introduce a new general anti-avoidance rule;

  • reform the place of establishment rules "to stop multinationals unfairly shifting profits out of the UK" (this could have an impact on UK tax treatment of non-UK funds' dealmakers and, in particular, their ability to engage with clients in the UK);

  • reform the rules to ensure that a large groups' tax bill is "more closely related to their sales in every country in which they operate"; and

  • review recent changes to the rules around intermediaries (IR35).

The Liberal Democrats are also proposing to reform the British Business Bank's support of venture capital funds in the start-up sector.


The SNP's manifesto confirms that, in addition to demanding the devolution of the tax powers and seeking to protect Scottish whisky from potential US tariffs, they would "continue to fight to ensure big corporations and the super-rich pay their taxes". This includes initiating a review of the IR35 rules.

The SNP also propose to "uncover the beneficial ownership of Scottish Limited Partnerships", which is likely to be a continuation of the ongoing crackdown on their alleged use in unlawful activities. On the basis that most carried interest vehicles use Scottish Limited Partnerships for legitimate planning reasons (in particular, to achieve separate legal personality and tax transparency at the vehicle level) and that disclosure of beneficial owners has not typically been a concern, the impact on the existing structures should not be significant.


We have advised a number of our clients on planning around some of the above policies in the last few months. Any groups that may be concerned and potentially affected by any of the above policies (or any indirect effect they may have on their businesses) should not hesitate to contact us.

This article was prepared for information purposes only and should not be treated as providing legal advice.

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