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Economic Substance Update

Jan 04, 2021

Self-Managed Funds and Fund Vehicles

On 29th December, the Minister for External Relations lodged two amendments to the Economic Substance legislation

Firstly, to include self-managed funds within scope of Economic Substance rules in terms of their fund management activities, for accounting periods that commence on or after 1st January 2021. In November 2019, the Crown Dependencies updated their joint guidance, to confirm these expectations of self-managed funds, and to confirm that legislation would be brought forward in each jurisdiction. Legislation has already been amended in both the Isle of Man and Guernsey. These are effective from 1st October 2020 (in Guernsey) and 16th December 2020 (in the Isle of Man). We are also reviewing the application of the directed and managed test to self-managed funds, with a view to clarifying this position shortly. We will keep you fully informed of developments.

Secondly, the opportunity is being taken to strengthen the general exemption for other fund vehicles which currently rely on guidance, by explicitly introducing this exemption into the legislation.

Covid Guidance

The Comptroller of Revenue has also published (below) a draft clarification to his Guidance on the Implications of Corona Virus for the Economic Substance Test. We have discussed with industry representatives the nature of this clarification and it is important that it is published now, pending confirmation through official channels.

Draft clarification to Guidance on the Implications of Corona Virus for the Economic Substance Test

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