The enemies of private equity have renewed their assault on the industry, redirecting their attack away from tax relief obtained through the structure of buy-outs and honing in on the tax paid by the private equity executives themselves.

Influential heavy-hitters such as Nicholas Ferguson of SVG Capital, among others, questioned how such executives could structure their pay and bonuses in a way that enabled them to pay less tax on their income than a cleaning lady would.

Chancellor Gordon Brown, meanwhile, said the Treasury was in the process of reviewing the taxation of private equity pay and would strive to ‘make sure there is justice and integrity’ on this issue.

Such comments have been eagerly cheered by Unions and tax campaigners. The GMB said the private equity ‘fat cats’ were losing the argument on tax, and Richard Murphy from Tax Research LLP proclaimed that ‘consensus has been created on this issue’.

Yet behind the politics nobody has suggested precisely what the government can do to orchestrate a ‘crackdown’ on private equity remuneration structures.

The main issue of contention regarding private equity pay is carried interest. The executives pay the same tax as anyone else on salaries and bonuses, but on carried interest, which is the share of profits that partners take home after paying out investors, they receive the significant tax benefits.

These benefits are available because, according to the British Venture Capital Association, carried interest is treated as investment in unlisted securities. Unlisted securities are eligible for a number of reliefs, and in this context the most important of these reliefs is the taper relief available on capital gains tax.

Private equity certainly takes advantage of the situation, but the rules they take advantage of are available to everyone else.

If the Treasury does decide to make buy-out chiefs pay more tax it is difficult to see how they are going to do it without changing the taper relief rules for everyone else.

‘This is a very difficult and controversial area to try and unravel,’ said Smith & Williamson’s Richard Mannion, one of the few advisers to say anything to Accountancy Age about the issue.

It seems the victory calls from those opposed to private equity may be premature.