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The transactions of “designated crypto assets” entered into from the tax year 2022 to 2023 onwards will be qualified for the Investment Manager Exemption in the United Kingdom. Certain legislation was announced by the U.K. government back in April and is now executed by the Commissioners for His Majesty’s Revenue and Customs (HMRC). 

On Dec. 20, the HMRC published its legislation to define ‘designated crypto assets’ and include them in the list of investment transactions that qualify for the Investment Manager Exemption.

The regulation, coming into effect on Jan. 1, 2023, doesn’t contain a positive definition of “designated crypto assets.” However, citing section 2 of the Investment Transactions(Tax) Regulations from 2014, it refers in particular to the class of “investment transactions.” Thus, the transaction for the provision of services in the period whilst the crypto asset is held by the non-U.K. resident, won’t be counted.

The Investment Manager Exemption (IME) serves the U.K. as a tool to strengthen the country’s status as a financial hub. It provides non-U.K. resident investors with a right to appoint U.K.-based investment managers to conduct certain investment transactions on their behalf, without bringing them into the scope of U.K. taxation.

Related: UK pushes crypto efforts forward through financial services reforms

Thus, the “designated cryptoassets” will be equated to stocks and other assets under the governance of British funds, acting on behalf of non-British investors. Such a measure was introduced as a part of the government’s FinTech Sector Strategy on Apr. 4. As the consultancy paper states:

“This will provide certainty of tax treatment to U.K. investment managers and their non-U.K. resident investors who are seeking to include cryptoassets within their portfolios, and we anticipate that this will also encourage new cryptoasset investment management businesses to base themselves in the U.K.”

As the HMRC decision reflects the long-term strategy of the previous government, there are signs of altitude changes among British regulators. Ashley Alder, who will assume control of the United Kingdom’s Financial Conduct Authority (FCA), the main financial regulator in the country, has recently told Treasury members that cryptocurrency-related businesses were “deliberately evasive” and suggested the sector facilitated money laundering.