»Ê¹ÚÌåÓýapp

Sums arising “directly or indirectly�(sums arising on or after 6 April 2015 and before 22 October 2015)

»Ê¹ÚÌåÓýapp requirements for Condition 2 (IFM36316) were slightly different prior to 22 October 2015 (IFM36351), as from 22 October 2015, there is legislation (ITA07/S809EZDA and ITA07/S809EZDB) which defines when a management fee arises to other persons or connected companies. Prior to 22 October 2015 a management fee had to arise ‘directlyâ€� or ‘indirectlyâ€� to an individual.

»Ê¹ÚÌåÓýapp use of the term ‘directly or indirectlyâ€� was purposefully intended to widen the scope of ‘ariseâ€� beyond the situations where the sum is directly paid or available to a fund manager.

Since management fees can arise indirectly, the interposition of another passive company or structure between the scheme and the individual entitled to the management fee will not prevent it becoming a disguised fee. »Ê¹ÚÌåÓýapp wording “directly or indirectlyâ€� used in the legislation, is to be interpreted widely enough that it catches any sum which is in effect a management fee paid for providing investment management services.

In particular, the disguised investment management fees (DIMF) rules apply in any situation where a fund manager may benefit from or otherwise could be considered to direct or control the management fees arising from a fund and the structure in question appears to avoid the effect of the DIMF rules to achieve a tax saving.

Fundamentally, management fees are remuneration paid by investors to a management team for the performance of services. It is not possible to alienate the right to that remuneration in a way that avoids the DIMF rules except where the legislation specifically makes provision to enable this.