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Are Your Carry and Co-Investment Returns Safe from UK Income Tax? (Sadly, Your Management Fee Probably Isn’t.)
25 March 2015
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The UK government has published the Finance Bill 2015. As expected, new rules are being introduced with effect from 6 April that seek to tax “disguised investment management fees” to UK income tax rather than under the lower tax rates offered by the capital gains tax regime.
The first draft of the rules, published at the close of 2014, was riddled with problems and brought the tax treatment of carry and co-investment returns into question as well as having an incredibly broad jurisdictional scope. The categories of exemption are now wider than when they were first proposed and both the co-investment returns and carried interest definitions more closely (although not always exactly) resemble commercial reality.
The rules could affect any fund which conducts activity (however minor) in the UK and will therefore need to be considered by UK based funds as well as non-UK based funds.
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