The UK government will review and potentially make changes to rules governing limited partnerships that are more than a century old.
In his budget speech Wednesday, UK Chancellor George Osborne said the government will “act to improve the process whereby new funds are authorised in the UK”. The government also will make changes to “limited partnerships to more effectively accommodate their use for private equity investments”, he said. The current legislation governing limited partnerships dates back to 1907 and the government will work to update those rules.
The British Private Equity & Venture Capital Association (BVCA) has recommended some of the rule changes the government will consider, including the establishment of a “white list” of actions LPs can take without encroaching on management responsibility and losing limited liability status, abolishing or modifying the requirement that all capital to be retained until the end of the partnership’s life and abolishing the requirement for the GP to wind up the partnership. The government is expected to publish a detailed consultation soon.
The plan to update limited partnership rules was welcomed by the BVCA.
“These reforms are ones we have argued for to maintain the competitiveness of the funds management industry in the UK and ensure that in a post-AIFMD world, UK limited partnerships remain the vehicle of choice for fund managers,” a BVCA spokesperson said.
In a further move to encourage investments in the UK, the government announced that from April 2015, UK corporation tax will be 20 percent, down from 28 percent in 2010 and 21 percent next year. “Today, I want us to send a message to anyone who wants to invest here, to create jobs here, that Britain is open for business,” Osborne said, calling the measure a “tax cut for jobs and growth”.
To lower the cost burden on employees, the UK government also announced a scheme called the ‘Employement Allowance’, which will remove the first £2,000 from the employer national insurance bill for small businesses. “It will mean that 450,000 small businesses – one-third of all employers in the country – will pay no jobs tax at all. For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed,” Osborne said. The measure is “worth up to £2,000 to every business in the country”, he added.
While the UK “is moving to low and competitive taxes”, according to Osborne, the government did stress again it will take measures to curb tax evasion, which include agreements with the Isle of Man, Guernsey and Jersey to bring in more than a billion pounds of unpaid taxes. The new rules will aim to stop the abuse of partnership rules, corporate tax losses and offshore employment intermediaries, which could impact UK private equity and real estate firms that are headquartered in these places.
The government will ‘name and shame’ the promoters of tax avoidance schemes, Osborne said. “My message to those who make a living advising other people how aggressively to avoid their taxes is this: this government is not going to let you get away with it,” he said.
In the annual UK Budget the treasury presents its economic policy for the coming year.