Schedule 7
Finance (No. 2) Bill
5:45 pm
Philip Dunne (Ludlow, Conservative)
I should like to give an example to elaborate on that point. It would be helpful if the Paymaster General would clarify whether the provision is intended to catch investment managers who seed a hedge fund offshore. Somebody may set up a hedge fund based in the UK that seeks to have its centre of operations in a jurisdiction such as the Cayman Islands, or another offshore jurisdiction attractive to other foreign investors who are looking to invest in that fund and who would not be subject to UK taxation. To get the fund off the ground the individual—possibly a sole trader—could make an investment in a special-purpose vehicle that would be set up in an offshore jurisdiction. That might be classified as a connected trade, because there would be no third party and it might take some time for the individual to establish the business—it often takes months if not years to get such investment vehicles running. It surely cannot be intended that such a situation be caught.