The road to an enhanced UK funds regime: what next?

As part of the Spring 2020 Budget, the government announced that it would carry out a wide-ranging review of the UK funds regime covering both tax and relevant areas of regulation (the Review). The overarching objective of the Review is to identify options which will make the UK a more attractive location to set up, manage and administer funds, and to support a wider range of more efficient investments better suited to investors’ needs.

Following a call for input in January 2021, on 10 February 2022, HM Treasury published “Review of the UK funds regime: a call for input: Summary of Responses” (the Summary).  The Summary sets out the government’s response to the feedback received, its key priorities and next steps. 

What next?

Chapter 3 of the Summary sets out next steps for the government and, where applicable, the FCA.  These include:

  • a review of the genuine diversity of ownership (GDO) condition
  • further consideration of options to improve the tax efficiency of UK authorised funds, and in particular multi-asset funds
  • a workstream focusing on further reforms to Real Estate Investment Trusts (REITs), which will also consider the interaction of REITs with the new asset holding companies (AHC) regime
  • further engagement with industry to explore what authorised fund managers would find helpful in terms of additional information regarding the application process
  • an HM Treasury, HMRC and FCA working group to progress work on permitting the distribution of capital by authorised funds
  • promotion of the UK’s fund offering abroad, including working with industry on further opportunities where possible
  • further work to explore options for the introduction of a new unauthorised contractual scheme fund structure

In addition, the government (and the FCA where applicable) will also be working to enhance the UK funds regime through:

  • a consultation on options to simplify the VAT treatment of fund management fees
  • ongoing work to facilitate the rollout of the Long-Term Asset Fund (LTAF) structure, including:
    • the continued work of the Productive Finance Working Group 
    • a planned FCA consultation on potentially changing the restrictions on the promotion of LTAFs to allow distribution to a broader range of retail investors
    • continued assessment of the case for any further changes to the way LTAFs are taxed


The intention behind HM Treasury’s proposals and the degree of engagement in the Review (there were 79 respondents to the call for input) are to be welcomed by the UK funds industry.  However, at present, the Review remains wide-ranging and high-level.  A significant level of further consultation and work will be required before proposals can be defined and implemented, and benefits to the industry assessed.

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