Revised version of SP 1/01 published

HMRC has published a revised Statement of Practice 1 (2021) (SP 1/01). The revised version generally applies from 1 January 2026 and is the result of extensive consultation following changes made to the UK PE definition and, in particular, a broadening of the UK definition of a dependent agent permanent establishment.

Background

SP 1/01 sets out HMRC's guidance on the investment manager exemption (IME). The updated version reflects changes to the underlying legislation made by the Finance Act 2026 in response to broader changes to the permanent establishment rules introduced by the Act. In particular, these changes involved the introduction of a revised definition of a dependent agent permanent establishment under UK domestic law, aligned broadly with the approach set out in the 2017 OECD definition. Given the broader application of this definition, HMRC accepted the importance of making it clear that the IME should be available in all relevant circumstances in order to provide investment managers and their non-resident clients with certainty that the extended definition of DAPE will not result in increased exposure to UK taxes. For more details of these wider changes, see our earlier article “Transfer pricing, PE and DPT: consultation outcome”.

The changes to the IME were initially consulted on during 2025 and our response to the consultation can be found here. A revised draft version of SP 1/01 was published at the time of the consultation response on these (and other) wider changes in HMRC's International Manual at INTM269210.

In particular, significant changes introduced to the IME as part of these changes included:

• the move from a “white list” of permitted investment transactions to an exclusionary approach based on carving out particular categories of transactions for policy reasons, being UK land, commodities and other physical assets
• the removal of the 20% test (under which it was a condition that there is the intention that the non-resident's taxable income from transactions carried out through the investment manager would, as to at least 80%, consist of amounts to which neither the manager nor connected persons had any beneficial entitlement) – it was accepted that this test did not really sit within the IME as a test of independent status, noting that other jurisdictions with similar exemptions did not operate a similar test.

At the same time, HMRC has taken the opportunity to update the text of SP 1/01 more generally.

Revised SP 1/01

The revised version of SP 1/01 is largely the same as a previous draft version published on 22 December 2025. However, a number of notable changes have been made in the interim:

• The earlier draft version stated that the relationship between a manager and a non-UK resident will be considered independent if the non-resident has certain characteristics (being a "qualifying fund" (based on the definition that applies for qualifying asset holding company purposes), being a widely-held collective fund, being actively marketed with the intention of becoming a widely-held collective fund or being wound up or dissolved). The revised version specifies that this only applies if the non-resident is an opaque fund, but that the relationship between a manager and a non-resident investor in a transparent fund will be considered independent if that fund has those specified characteristics (paragraph 48).
• It is now specified that the "independent capacity" test has to be met in relation to a transparent fund by considering the fund manager and each investor individually rather than considering the fund manager's relationship with the investors collectively (paragraph 46).
• Intangible and contractual assets are now expressly included in the examples of investment transactions for IME purposes (paragraph 33). A number of other examples discussed with HMRC are not expressly addressed in the list, and it should be noted that some of the discussion in this section of SP 1/01, for example around loan origination, may arguably be historic given the current terms of the IME.

(One unfortunate omitted change is the failure to update the statutory reference from “Schedule XX FAXXXX” in paragraph 57.)

The revised version of SP 1/01 has effect from 1 January 2026 except to the extent that it requires a non-resident or its investment manager to make changes to current circumstances or contractual arrangements in order to comply with the terms of this statement, in which case the 3 November 2016 version of SP1/01 may still be applied.

Comment

The changes to SP 1/01 and the IME more generally are largely welcome. In general, we consider that the changes should maintain (and in some cases improve) the UK’s competitiveness as a location from which to perform alternative investment management services, although care will still be required with certain investment strategies to ensure the IME is available.