|Fund Structure||English Limited Partnership, specifically a Private Fund Limited Partnership (most common)|
|Cost||£20 to register the limited partnership |
£20 to apply for PFLP designation
£100 for same day registration (currently suspended)
Formation can become costly depending on the law firm or tax advisor engaged
|Timing||Varies but can pay an expedited fee for same day turnaround|
|Fund Marketing||Subject to the UK AIFMD (equivalent to AIFMD)|
|Tax Treatment||Several Tax Incentive Schemes|
|British Private Equity & Venture Capital Association||https://www.bvca.co.uk/|
The United Kingdom is an attractive fund domicile due to the UK’s established and trusted legal system, relatively low corporate tax rates in the EU and tax allowances, specialist VC tax incentives; and highly skilled workforce and flourishing startup ecosystem. Based on the British Venture Capital Association’s 2019 VC Industry Report, key sectors in the UK include ICT (communications, computer, and electronics), consumer good and products, business products and services, financial and insurance services, and biotech and healthcare.
Venture capital funds are typically formed as an English Limited Partnership, but designated as private fund limited partnership (PFLP). PFLPs are tax transparent, lightly regulated, and offer investors limited liability protection so long as the investors are not involved in the day-to-day management of the fund. Venture capital funds can also be structured as a Venture Capital Trust (VCT). VCTs are publicly listed companies on the London Stock Exchange run by fund managers. The benefit to structuring a fund as a VCT is the VCT is not taxed on capital gains. However, the compliance requirements for being approved and maintained as a VCT make this structure risky and more burdensome than the limited partnership structure.
Prior to Brext, the UK was subject to EU law including the Alternative Investment Fund Manager Directive (AIFMD), the law that regulates the managers of investment funds in the EU. The UK has since enacted an equivalent regulation called the UK AIFMD, however, Brexit has led to some uncertainty regarding the UK’s compliance requirements with AIFMD, tax treaty benefits between the UK and EU, and the impact of Brexit on UK-based fund managers marketing their funds in the EU. In addition, the UK no longer has access to the management and marketing passports allowed under AIFMD. As such, there are other jurisdictions that may be more attractive fund domiciles in the EU, like Estonia below.
More Domicile Analysis
For more information on fund domiciles, including details and analysis below: