The Alternative Investment Management Association has warned the UK tax authorities that continuing uncertainty over the country's Investment Manager Exemption could lead to a "significant loss of business" for London as managers consider basing themselves in more tax friendly jurisdictions. AIMA delivered its warning in a response to HM Revenue & Customs's consultation on the proposed revision of Statement of Practice (SP1/01), which includes changes to the IME. The association says that the IME plays a crucial role in the industry as it enables offshore hedge funds, managed from the UK, to be largely exempt from UK taxation, allowing them to be globally competitive. Without this exemption, hedge fund managers may decide to relocate. AIMA has also proposed that the scope of “investment transaction” is broadened as widely as possible and should include asset classes that are not specifically excluded by legislation. The risk that the IME could be withdrawn for a whole fund if it carried out a single transaction that falls outside the definition of an investment transaction, is seen as disproportionate and unreasonable. Currently, the customary remuneration test is a test of gross fees received by UK investment managers, and given that there is no legislative basis for the HMRC proposal to move this to a net basis, AIMA says that the status quo should remain. AIMA proposes that any new Statement of Practice should not apply to existing funds for at least 12 months, to allow investment managers to adjust to its requirements.