Last Updated February 27, 2019

Law and Practice

Contributed By Travers Smith LLP

Authors



Travers Smith LLP investment funds group comprises four partners and 15 other dedicated fee earners, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The investment funds group sits alongside the firm’s market-leading private equity M&A practice, one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The investment funds group is best known for private funds and closed-end listed funds.

The tax structuring preference of an investor will depend on its particular circumstances and the asset class or classes in which the fund invests. Funds will commonly have a wide mix of different types of investors (eg, UK-resident corporates and individuals, sovereign wealth funds and pension funds) and fund managers will usually look to structure the fund so as to be tax efficient for the investor-base as a whole rather than a particular investor or class of investor (unless a particular investor or class is particularly important).

A key issue for all investors will typically be tax neutrality when investing through a fund (wherever that fund is established) ie, they will not want that investment to leave them in a worse tax position than if they directly held the underlying assets. Investors will also commonly not want to be subject to tax-filing obligations in new jurisdictions solely because of their investment in the fund, or, if that is not possible, they will commonly want to be made aware of the relevant filing obligations by the fund manager. Another factor that is typically important for investors when investing in funds (wherever the funds are located), is a wish to minimise withholding taxes on their returns from the fund.

From a UK perspective, an important issue will be whether the fund would be considered to be trading. This can be relevant both at fund and investor level, as, for certain UK fund types and investor classes, their tax privileges do not extend to trading profits (eg, UK-registered pension schemes are, generally, exempt from tax on their investment income and capital profits but this exemption does not apply to trading profits).

Travers Smith LLP

10 Snow Hill
London
EC1A 2AL

+44 20 7295 3000

+44 20 7295 3500

david.patient@traverssmith.com www.traverssmith.com
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Authors



Travers Smith LLP investment funds group comprises four partners and 15 other dedicated fee earners, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The investment funds group sits alongside the firm’s market-leading private equity M&A practice, one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The investment funds group is best known for private funds and closed-end listed funds.

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