Part 13

Tax avoidance
CHAPTER 5E

Disguised investment management fees

Disguised investment management fees: charge to income tax
809EZA
1
Where one or more disguised fees arise to an individual in a tax year from one or more investment schemes (whether or not by virtue of the same arrangements), the individual is liable for income tax for the tax year in respect of the disguised fee or fees as if—
a
the individual were carrying on a trade for the tax year,
b
the disguised fee or fees were the profits of the trade of the tax year, and
c
the individual were the person receiving or entitled to those profits.
2
For the purposes of subsection (1) the trade is treated as carried on—
a
in the United Kingdom, to the extent that the individual performs the relevant services in the United Kingdom;
b
outside the United Kingdom, to the extent that the individual performs the relevant services outside the United Kingdom;
and for this purpose “
the relevant services
” means the investment management services by virtue of which the disguised fee or fees arise to the individual in the tax year.
2A
Subsection (2B) applies instead of subsections (1) and (2) where—
a
one or more disguised fees arise to an individual in a tax year (“the relevant tax year”) from one or more investment schemes (whether or not by virtue of the same arrangements),
b
the disguised fees consist of carried interest which is income-based carried interest,
c
the individual is
UK
resident in the relevant tax year, and
d
the individual makes a foreign income claim for the relevant tax year.
2B
To the extent that the income-based carried interest arises by virtue of pre-arrival services, the individual is liable for income tax for the relevant tax year in respect of it as if—
a
in relation to pre-arrival services performed in the United Kingdom—
i
the individual were carrying on a trade for the relevant year consisting of the performance of those services,
ii
the income-based carried interest, so far as arising by virtue of those services, were profits of that trade, and
iii
the individual were the person receiving or entitled to those profits, and
b
in relation to pre-arrival services performed outside the United Kingdom—
i
the individual were carrying on a trade for the relevant tax year consisting of the performance of those services,
ii
the income-based carried interest, so far as arising by virtue of those services, were profits of that trade, and
iii
the individual were the person receiving or entitled to those profits.
2C
In subsection (2B) “
pre-arrival services
” means investment management services performed
in any period—
a
ending immediately before a qualifying tax year in relation to the individual (within the meaning of section 845B(3) of ITTOIA (qualifying new residents)), and
b
that consists only of tax years for which the individual is not UK resident.
3
For the purposes of this Chapter a “disguised fee” arises to an individual in a tax year from an investment scheme if—
a
the individual
at any time performs or is to perform
investment management services directly or indirectly in respect of the scheme under any arrangements,
b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c
under the arrangements, a management fee arises to the individual
... from
an investment scheme
in the tax year (see section 809EZB), and
d
some or all of the management fee is untaxed;
and the amount of the disguised fee is so much of the management fee as is untaxed.
4
For the purposes of subsection (3) the management fee is “untaxed” if and to the extent that the fee would not (apart from this section)—
a
be charged to tax under
ITEPA
2003 as employment income of the individual for any tax year, or
b
be brought into account in calculating the profits of a trade of the individual for the purposes of income tax for any tax year.
5
In subsection (4) “
trade
” includes profession or vocation.
6
In this Chapter “
investment scheme
” means—
a
a collective investment scheme, or
b
an investment trust.
7
The reference in subsection (6)(a) to a collective investment scheme includes—
a
arrangements which permit an external investor to participate in investments acquired by the collective investment scheme without participating in the scheme itself, and
b
arrangements under which sums arise to an individual performing investment management services in respect of the collective investment scheme without those sums arising from the scheme itself.
S. 809EZA(2C)(a)(b) and words substituted for words (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), s. 37(2)(e)(ii)(4)
Words in s. 809EZA(3)(c) omitted (with effect in accordance with s. 45(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 45(2)
Words in s. 809EZA(3)(a) substituted (with effect in accordance with s. 36(5) of the amending Act) by Finance Act 2016 (c. 24), s. 36(2)(a)
S. 809EZA(2A)-(2C) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2016 (c. 24), s. 38(1)
S. 809EZA(7) inserted (with effect in accordance with s. 36(5) of the amending Act) by Finance Act 2016 (c. 24), s. 36(3)
S. 809EZA(2A)(d) substituted for s. 809EZA(2A)(d)(e) (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), s. 37(2)(e)(i)(4)
S. 809EZA(3)(b) omitted (with effect in accordance with s. 36(5) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 36(2)(b)
Words in s. 809EZA(3)(c) substituted (with effect in accordance with s. 36(5) of the amending Act) by Finance Act 2016 (c. 24), s. 36(2)(c)
Pt. 13 Ch. 5E inserted (with effect in accordance with s. 21(4) of the amending Act) by Finance Act 2015 (c. 11), s. 21(1)