U.K. includes crypto investments under the Investment Manager Exemption

Published at: Dec. 21, 2022

The transactions of “designated crypto assets” entered into from the tax year 2022 to 2023 onwards will be qualified for the Investment Manager Exemption in the United Kingdom. Certain legislation was announced by the U.K. government back in April and is now executed by the Commissioners for His Majesty’s Revenue and Customs (HMRC). 

On Dec. 20, the HMRC published its legislation to define ‘designated crypto assets' and include them in the list of investment transactions that qualify for the Investment Manager Exemption.

The regulation, coming into effect on Jan. 1, 2023, doesn’t contain a positive definition of “designated crypto assets.” However, citing section 2 of the Investment Transactions(Tax) Regulations from 2014, it refers in particular to the class of “investment transactions.” Thus, the transaction for the provision of services in the period whilst the crypto asset is held by the non-U.K. resident, won’t be counted.

The Investment Manager Exemption (IME) serves the U.K. as a tool to strengthen the country’s status as a financial hub. It provides non-U.K. resident investors with a right to appoint U.K.-based investment managers to conduct certain investment transactions on their behalf, without bringing them into the scope of U.K. taxation.

Related: UK pushes crypto efforts forward through financial services reforms

Thus, the “designated cryptoassets” will be equated to stocks and other assets under the governance of British funds, acting on behalf of non-British investors. Such a measure was introduced as a part of the government’s FinTech Sector Strategy on Apr. 4. As the consultancy paper states:

“This will provide certainty of tax treatment to U.K. investment managers and their non-U.K. resident investors who are seeking to include cryptoassets within their portfolios, and we anticipate that this will also encourage new cryptoasset investment management businesses to base themselves in the U.K.”

As the HMRC decision reflects the long-term strategy of the previous government, there are signs of altitude changes among British regulators. Ashley Alder, who will assume control of the United Kingdom's Financial Conduct Authority (FCA), the main financial regulator in the country, has recently told Treasury members that cryptocurrency-related businesses were "deliberately evasive" and suggested the sector facilitated money laundering.

Tags
Adoption
Regulation
Investments
United Kingdom
Uk Government
Related Posts
Competition drives young traders’ crypto investments, says UK watchdog
Most young investors in the United Kingdom are entering the crypto market thanks to the hype on social media and news, but they are not aware that the market is not regulated, a new study published by the United Kingdom's Financial Conduct Authority (FCA) revealed. The survey revealed that a majority (69%) of the investors under the age of 40 mistakenly believe that crypto markets are regulated. More than three-quarters (76%) of young investors who put money on risky assets like cryptocurrencies, forex or crowdfunding are driven by competition with friends and family. The financial watchdog surveyed 1,000 British investors …
Adoption / Oct. 20, 2021
Over 2 million adults in UK now hold crypto, FCA survey finds
A new study by the United Kingdom’s Financial Conduct Authority has indicated a significant increase in cryptocurrency ownership in the country. On Thursday, the FCA published the results of a consumer survey which found that 2.3 million adults in the U.K. now hold crypto assets, up from 1.9 million last year. Alongside the increasing number of crypto investors, the study also identified a surge in ownership volumes, with median holdings rising to 300 British pounds ($420) from 260 pounds ($370) in 2020. The rising popularity of holding cryptocurrency comes in line with an uptick in the awareness level as 78% …
Adoption / June 17, 2021
Stablecoins have a new name in Great Britain: Law Decoded, Oct. 24–31
The first full week under the leadership of the newly-elected Prime Minister Rishi Sunak saw a major landmark for crypto regulation in the United Kingdom. The Financial Services and Markets Bill, made public on Oct. 25, aims to enhance the U.K.’s position as a “global leader in financial services” — but what is more important is that it contains some new definitions for crypto products. The bill moves stablecoins from the category of crypto assets to digital settlement assets (DSA) — a new category marked by its potential “to develop into a widespread means of payment.” It’s yet to be …
Adoption / Oct. 31, 2022
Cryptocurrency has become a playground for fraudsters
News involving crypto and fraud is ubiquitous in the white-collar crime sphere and, perhaps more worryingly, these fraudulent activities in the crypto sector are not limited to a single type of crime. Diverse and distinct yet with one common thread, these crimes involve real money and crypto investors are the victims. Many people have placed their life savings into crypto and, on a larger scale, private equities, pension schemes and even nation-states are principal investors and losers. There are con artists who will try and entice their targets to invest in a get-rich scheme that turns out to be a …
Adoption / Dec. 6, 2022
FTX collapse calls for 'prudent regulation' in the UK
The collapse of FTX is being viewed as a cautionary tale and a precursor for more prudent regulation by public and private sector players in the United Kingdom. Bank of England deputy governor Sir Jon Cunliffe made headlines ahead of the Christmas weekend in an interview with Sky News, outlining his belief that greater protection needs to be afforded to investors in the U.K. looking to gain exposure to cryptocurrency markets. Cunliffe stressed that prospective cryptocurrency users and investors should have a structure to invest in the asset class that ensures similar consumer protection and integrity to conventional financial markets. …
Adoption / Dec. 26, 2022