Revenue does u-turn on venture capital tax

Link: UK investment market continues to slide

The deal means a tax rate of 10% instead of one up to 40%.

Paymaster general Dawn Primarolo confirmed a deal has been struck with the British Venture Capital Association resulting in a ‘memorandum of understanding’ between the BVCA and the Inland Revenue.

This deal ‘clarified’ the income tax treatment of carried interests in venture capital limited partnerships and managers’ equity investments in management buyouts.

Replying to questions in the Commons from shadow Tory treasury minister Stephen O’Brien, she said: ‘There has been no change to the taxation of carried interest in the venture capital industry.’

She confirmed the position had not been changed by the last Finance Act provisions intended to treat rolled up interest as income.

O’Brien said: ‘The government has been forced to climb down over its proposed kick in the teeth to the British venture capital industry. Ministers have given in to Conservative arguments and pressure from the vital British venture capital industry which would have been driven abroad by Gordon Brown’s greedy and cack-handed proposals.’

A BVCA spokesman said: ‘We have had extremely satisfactory and constructive discussions with the Treasury and the Inland Revenue.’

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