IFM36354 | Disguised fees: Condition 2 (sums arising on or after 6 April 2015 and before 22 October 2015) - A management fee arising to the individual: Sums arising from 'loans and advances'

Sums arising from ‘loans and advances’ (sums arising on or after 6 April 2015 and before 22 October 2015)

In the early years of an investment scheme established as a limited partnership, it is common that an advance is made to the general partner of the limited partnership fund in order to pay the annual management fee to the investment manager. This is due to lack of profits or gains at this stage within the investment scheme.

Where the payments from the scheme to the general partner take the form of a loan the management fee paid to the manager from this loan will still arise to the manager in return for their investment management services as set out in ITA07/S809EZB(1). If amounts received are untaxed, they are capable of being disguised fees.