U.K. Authorities Start Tax Inquiries of Hedge Funds CQS, Cheyne Capital
U.K. tax authorities are conducting inquiries into London-based hedge funds CQS and Cheyne Capital Management.
HM Revenue & Customs is querying matters that relate to the country’s so-called salaried member legislation, according to regulatory filings. The law seeks to ensure that members of partnership structures who would normally be regarded as employees are treated as staff for tax purposes. Such structures are widely used by hedge funds and other financial firms.
“The assessments raised are protective in nature,” the firms both said in their filings with the U.K.’s Companies House, lodged by CQS earlier this month and Cheyne in January. “They set out sums HMRC consider may be due, rather than are actually due.”
In its filing, CQS said it was unable to estimate the financial effect of the inquiry. A spokesperson for the hedge fund declined to comment further, while an HMRC spokesperson also declined to comment.
Tax authorities have in recent years been stepping up scrutiny of U.K. asset managers established as limited liability partnerships, regarding their approach to the salaried member rules that were introduced in 2014.
“This relates to a routine check by HMRC around the tax classification of partners, which we understand is affecting many in the financial services industry,” said a spokesperson for Cheyne on Wednesday. “Cheyne and its advisers consider HMRC’s claim will be unsuccessful.”
Tax authorities across the globe have paid close attention to hedge funds and other sophisticated financial investors to ensure they are compliant. Earlier this month, Bloomberg reported that Jim Simons, the founder of quantitative hedge-fund manager Renaissance Technologies, and his colleagues will pay billions of dollars in back taxes, interest and penalties to resolve one of the biggest tax disputes in U.S. history.
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