Carrying little favour

9 September 2020 By Liam Proud Follow @liamwardproud

A UK review of capital gains taxes may close the infamous carried interest loophole. Private equity’s threats to move abroad have less force since others, like U.S. presidential candidate Joe Biden, are also hostile. The industry’s growing heft makes it a bigger global target.

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The British Private Equity & Venture Capital Association on Sept. 8 advised the government not to change the way it taxes carried interest.

Carried interest is a private equity group’s share of profits from a fund, usually around 20%. Much of that cash goes to buyout firms’ senior staff. In the UK, it is treated as a capital gain, and therefore typically incurs a 28% tax rate rather than the 45% top rate on income tax.

“It is also important that any tax changes do not undermine the government’s clearly stated policy of developing the UK as an attractive location for the asset management industry”, the trade body said.

Finance Minister Rishi Sunak has asked the Office of Tax Simplification to review capital gains taxes in Britain. It launched a consultation in July, which ends in October.

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