Shaping the future of UK funds

Simmons & Simmons has now responded to the HM Treasury Call for Input, 'Review of the UK funds regime'. This is a significant - and timely - review which could result in wide ranging changes to the tax and regulatory frameworks for investment funds in the UK. Our response calls for ambitious reforms to create a coherent regime, with taxation, product regulation and investor access working together to create a truly world-class environment for investment funds. We propose:

• A regime with flexibility and innovation at its heart.

• A simple, certain and effective tax system allowing full fund-level exemption from taxation so as to achieve tax neutrality for investors.

• VAT zero rating for investment management and other services provided to UK funds, so that UK based fund managers are not disadvantaged by choosing to launch the new vehicles.

• A three-tier product regulatory framework, with levels of regulation set at a level appropriate to the target audience for each fund type. This would comprise:

  • A full suite of unregulated product types for professional and sophisticated investors.
  • A lighter-touch regulated fund regime, centred on reform of the QIS, available to both professional/sophisticated investors and to certain retail investors (those receiving advice or accessing the product indirectly via e.g. a pension product). This tier would also house the proposed “Long-Term Assets Fund”.
  • A fully regulated fund product, along the lines of the current UCITS/NURS regime, for direct access by all investors including the retail public.

• Full flexibility as to legal form within each tier.

• A more considered approach to liquidity issues for retail investors, allowing responsible levels of access to illiquid assets.

• The creation of a regime which will allow the UK to become a leading jurisdiction for all funds, but in particular those focussing on:

  • ESG/sustainability
  • digitalisation; and
  • productive finance.

Our response was heavily informed by input from our clients. Supplementing our general experience and current awareness, we conducted a detailed client survey and organised two roundtable discussions, all of which generated extremely useful feedback and ideas.

Our full response consists of a detailed covering letter, a table of response to the specific questions posed by the Call for Input and a summary of the results of our client survey. It can be accessed below.