Significant tax changes on the horizon for managed investment schemes

Today the Inland Revenue released The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (the Bill) which included the Inland Revenue’s proposed changes to the GST treatment of services supplied, directly or indirectly, by managers and investment managers to managed funds and retirement schemes.

The proposed approach is that, with effect from 1 April 2026, management fees will be fully subject to GST at 15%.

This is a significant departure from current practices and will have an impact for both managers, investment managers and the funds they manage. In particular, a manager or an investment manager will be able to fully recover GST at 15% on their management costs. Conversely, managed investment schemes may incur a greater GST cost that is passed to them from their manager and / or the investment manager.

Transitional rules are also proposed which require managers and investment managers to continue to apply their existing GST treatment until 1 April 2026. As the Bill is currently drafted, these GST changes will apply to a “manager” and an “investment manager” who provide services to a “managed investment scheme”, as those terms are defined in the Financial Markets Conduct Act 2013 (FMCA).

If you are interested in receiving further detail in relation to the above changes or subsequent changes as the Bill progresses, please contact one of our tax team or your regular DLA Piper contact.

A copy of the Bill can be found here.