Private equity executives who only have to pay 10% tax on carried interest they receive can reduce the tax they pay even further by taking advantage of a 20-year-old HMRC memorandum.

According to the FT the 1987 rule allows buy-out executives to offset 20% of the initial price of the assets they buy against the already low tax rate they pay on carried interest.

The inner workings of private equity have been exposed following intense scrutiny from unions and politicians, who have criticised the private equity firms of destroying jobs, avoiding tax and opaque governance.

Leading private equity heads from Blackstone, 3i, Carlyle Group and KKR are all to answer questions on these issues at a Treasury select committee meeting this afternoon.

According to City A.M., select committee member Angela Eagle said more firms were to be called before the committee in the future.

Further reading:

Terra Firma CEO leaps to private equity defence

Steps the Treasury could take to tax buyout bosses at a higher rate