US tax changes affecting UK funds

While the US press has been covering whether the Bush tax cuts would be extended and US fund managers have been focused on whether their carried interests will be taxed at ordinary income rates in the future several new US tax provisions that were not as widely followed have become law. In particular provisions enacted as part of the Hiring Incentive to Restore Employment Act 2010 may have a material impact on UK funds and their investors. Many of these provisions were originally part of the Foreign Account Tax Compliance Act 2009 (FATCA). Fund managers will need to consider the potential impact of the new FATCA rules and the response to them. Specifically the new rules discussed in more detail below may increase the amount of US tax withheld from UK funds on certain investments; require increased reporting by UK funds to the US Internal...