Private equity industry facing tax crackdown

Treasury and Revenue & Customs are considering a new tax regime for
private equity firms which could see them paying hundreds of millions of pounds
in extra tax, after a letter was sent last week to members of the British
Venture Capital Association.

Under consideration is the option to increase the capital gains tax rate from
just 10% to 40%, regarded as the worst-case scenario by industry insiders, the
Sunday Times reported.

Private-equity firms are estimated to own companies that employ about 20% of
the UK’s private-sector workforce, include companies like Debenhams, Focus
Wickes and the AA.

The Treasury and HMRC are also looking at whether it can charge more tax on
private-equity fund managers’ share of the profits from any given investment.

The Revenue said it wanted to ‘engage in a dialogue to explore the issues and
the impact on commercial arrangements’.

The BVCA will lead the discussions with the Treasury.

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