Income Tax Act 2007 section 809EZA

Disguised investment management fees: charge to income tax

Section 809EZA imposes an income tax charge on individuals who receive management fees from investment schemes that would otherwise escape tax, by treating those fees as trading profits.

• Where an individual receives untaxed management fees from an investment scheme, those fees are treated as profits of a deemed trade and charged to income tax accordingly
• The deemed trade is treated as carried on in the UK to the extent the investment management services are performed in the UK, and outside the UK to the extent they are performed abroad
• Special rules apply where the disguised fees consist of income-based carried interest received by a UK-resident individual who has made a foreign income claim — in that case, only the portion arising from pre-arrival services (performed during a prior period of non-UK residence) is taxed under this provision
• An investment scheme for these purposes means a collective investment scheme (including co-investment and side arrangements) or an investment trust