Global Daily Tax News, UK Preparing Legislation To Reform Carried Interest Rules, (Aug 5, 2024)

The UK Government has indicated that provisions reforming the tax rules for carried interest will be included in the 2024-25 Finance Bill.

On July 29, 2024, the Government issued a call for evidence, inviting views from stakeholders.

Carried interest is a form of performance-related reward received by fund managers, primarily within the private equity industry. Unlike other such rewards, carried interest can currently be taxed at Capital Gains Tax (CGT) rates of 18 percent and 28 percent.

In the call for evidence, the Government said, "While the tax treatment of carried interest is the subject of considerable debate, the government believes that the current tax regime does not appropriately reflect the economic characteristics of carried interest and the level of risk assumed by fund managers in receipt of it."

The Government is specifically requesting that stakeholders respond to the following three questions:

• Question 1: How can the tax treatment of carried interest most appropriately reflect its economic characteristics?

• Question 2: What are the different structures and market practices with respect to carried interest?

• Question 3: Are there lessons that can be learned from approaches taken in other countries?

Feedback is being sought by August 30, 2024.

An announcement is expected in the October 30, 2024, Budget.