The private equity industry is facing a tough shake-up in the way it is taxed, with chancellor Alistair Darling proposing stiffer capital gains tax (CGT) rates and lengthening the taper relief period.

According to the FT, Darling is considering an increase in CGT from 10% to 20% for businesses classed as business assets as well as an increase in the taper relief period from two years to five years.

Also under consideration is the idea of drawing a tax distinction between mega-fund buyouts and small venture capital deals.

The reforms were reportedly discussed in meetings last week between Treasury officials and private equity representatives. Buy-out bosses are said to be relieved by the proposals, as they feared much harsher measures.

Further reading:

Private Equity to be named and shamed

MPs call for private equity shake-up

Treasury Committee to unveil private equity report