The author of a HMRC report on the taxation of carried interest has accused
the private equity industry of exploiting ignorance of carried interest to
maintain its lucrative tax position.
In a letter to the Times, Peter Halford, who compiled the HMRC
report in 2005, said the buy-out industry ‘exploited’ ignorance of carried
interest ‘to seek to maintain its generous tax treatment’.
‘In a typical fund structure, the fund managers put up a nominal amount of a
few thousand for their carried interest, compared with the hundreds of millions
invested by outside investors,’ Halford said.
In the letter Halford explains that fund managers usually ‘put up less than
0.01% of the overall investment’ but typically are entitled to a 20% share of
the funds capital.
‘That is the reward for their labour and should be taxed as such,’ Halford
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