The Investment Manager Exemption (IME) allows an offshore investment fund to appoint a UK-based investment manager without exposing the fund's offshore profits to UK taxation, provided certain tests are met. The key tests include that the investment manager must provide bona fide investment management services independently of the fund, remuneration must be on normal commercial terms, and the investment manager and connected persons cannot have over a 20% beneficial interest in the fund's income. For the IME to apply, the fund's activities must amount to trading in the UK. The IME ensures the UK remains competitive for investment managers while also ensuring any fees earned by a UK manager are taxed accordingly.