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UCITS IV will introduce a number of changes designed to remove barriers to the cross-border marketing and management of UCITS funds.  In addition, the new Directive will establish a framework for UCITS funds to merge and provide for 'master-feeder' structures whereby one UCITS fund (a 'feeder') will be able to invest into another fund (a 'master').  As previously announced, the Government will introduce a new tax transparent regulated fund vehicle in 2012 which is intended to ensure that no adverse tax consequences will arise as a result of establishing a 'master-feeder' structure in the UK.  Responses to the consultation must be submitted by 21 March 2011.  UCITS IV must be transposed into UK law by 1 July 2011.

Although details are still awaited, the introduction of a new tax transparent vehicle within the UK's regime for authorised funds will be welcomed.  A genuinely tax transparent fund vehicle will represent a further development for the asset management industry which has seen significant changes in recent years.

The consultation document also reconfirms the Government's commitment to maintain the UK's position as a major global centre for asset management.  Underlying this commitment is the belief that tax policy should be aligned with modern business practice and that commercial decisions should not result in adverse tax consequences.  The Government intend to continue to develop the details of the new vehicle in further consultation with industry during 2011 before introducing the regime in 2012.  Unfortunately, this means that the full benefit of the opportunities presented by UCITS IV (including, in particular, the possibility of creating master-feeder structures) may only be realised one year after the new Directive is transposed into UK law.  It remains to be seen whether or not this will result in the UK being placed at a competitive disadvantage.

The consultation document also contains proposals for the implementation of a streamlined notification procedure under the fund marketing passport, the creation of a new EU wide passport for fund management companies and new rules for investor information disclosure.  The new regime will also include procedures intended to improve co-operation between different regulatory authorities and a new harmonised EU framework for cross-border mergers of UCITS funds.

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