The Treasury could establish a minimum threshold for ‘carried interest’
investments to crack down on private equity, advisers are indicating. The rate
of tax paid by buyout bosses has been the focus of a storm of criticism over the
past week. Private equity executives often make huge profits from shareholdings
in the businesses they run, taking their income as capital gains and being taxed
at 10% rather than 40%.
The taper relief rules mean the bosses pay less than cleaners, industry
figures have admitted.
The Treasury is reviewing the rules, but so far it is unclear who is leading
the review, or what is planned. The only thing advisers are sure of is that
something will change.
Advisers told Accountancy Age that a minimum threshold might
effectively target private equity.
If directors of companies had to invest at least half a million pounds of
their own money to benefit from the CGT taper relief rules, private equity
executives could be forced to pay higher rates without damaging business angels
and others for whom the rules are intended.
The risk is that business angels who do not invest large enough sums will no
longer be eligible for taper relief, which could see investment at the smaller
end of the market dry up.
‘There are definitely going to be some losers if the rules for private equity
remuneration are revised,’ one adviser said.
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