Experts warned of the possibility that hedge funds based in the UK could relocate abroad after the British government made known its plans to crackdown on corporate partnerships in its fight against tax avoidance, tax evasion and fraud. According to a report on The Telegraph, the government had said it was able to obtain new information from its consultations which revealed that the clampdown would greatly impact fund managers that operate as partnerships. Chancellor George Osborne had said that the government expected to get GBP 3.27 billion once it casts a wider net for its clampdown, with GBP 1.92 billion set to be gathered from alternative investment fund managers.

Wilkins Kennedy Partner Peter Goodman told The Telegraph that the move could make hedge fund managers based in London transfer to Switzerland, Hong Kong and Singapore. He said the hedge fund managers targeted by the government were those who were operating under a partnership status so they could route their personal income through the profits of the firm and as a result avoid higher income tax rates.

Goodman said, "Whatever the rights or wrongs of this policy, it is likely to push hedge funds away from the UK."

According to the report, there are three ways that partnerships are able to avoid. The first way is for them to establish a corporate partner where a part of their profits can be channeled. The report said this strategy would only let them pay the corporation tax which is much lower instead of the higher income tax. The second method is for the companies to categorize their employees as self-employed partners. This way, they don't have to pay for things like national insurance contributions, the report said. The third method is for partners to reduce tax liabilities is by routing their profits through service firms. The report explained that this enables them to exploit the compensating adjustments provided for under the rules on transfer pricing.