Guess what? The Tax may also cover private equity funds, hedge funds and boutiques

As a cheering note with which to end the day, we regret to inform you that The Tax appears to be a lot more wide-ranging than initially reported.

Various news sources have been reporting that hedge funds and private equity were exempt. This may be wishful thinking.

Law firm Withers has issued a report stating that:

As drafted, the proposed legislation will catch family offices, UK investment managers of hedge funds, private equity funds and many more, not just the banks who received financial support (directly or indirectly) from the UK taxpayer.

Samantha Morgan, a London-based solicitor at Withers, says they've fielded numerous calls today from hedge funds, family offices, and boutiques concerned about the tax. "When you look at the press release, it looks like this was aimed at banks, but when you look at what a definition of what a bank is, it's very wide," she says.

The relevant section is on page six of the technical document, and states that it will cover everyone involved in the following activities:

· Accepting deposits (in other words providing current accounts and deposit accounts to retail customers);

· Dealing in investment as principal (in other words trading in derivatives, bonds commodities etc. on their own account);

· Dealing in investments as agent (in other words trading in the above types of investments as behalf of clients);

· Arranging deals in investments;

· Safeguarding and administering investments on behalf of clients; and

· Regulated mortgage contracts (in other words carrying out retail mortgage lending).

One senior corporate financier who's setting up an advisory boutique told us he's spoken to three law firms, two of whom think his business will fall under the new tax.

John Whiting, a tax policy director at the Chartered Institute of Taxation, says there's a possibility the regulation could be amended if it's found to have included businesses which should be excluded.

However, he also says there's a possibility it could be extended beyond April 5th if organizations appear too keen to exploit the loopholes.

"There's an element of, 'If you behave yourselves this will go away, but if there's a lot of scheming, we'll extend it,'" Whiting says.