Advisers say tax attack on private equity will yield little

Senior tax advisers have rubbished claims that tightening tax rules for
private equity firms will see an increase in tax revenues.

Private equity firms have benefitted from interest rate relief, which allows
them to deduct interest payments from tax. The rules were amended last year and
are set to take effect this year when private equity groups file final year
accounts, the FT

The new rules bring private equity under the rules for transfer pricing,
which limit the amount of interest relief that can be claimed.

Experts, however, have warned that the new rules will not generate
significant amounts of new revenue.

KPMG partner Paul
Megson said the rules may not be ‘terribly effective as a revenue raiser’, while
partner Tim Hughes said Revenue might be ‘disappointed’.

Changes in the debt markets and bank appetite for risk have, however, reduced
the impact of the transfer pricing rules as it has become easier to show that an
independent lender was prepared to make a large loans.

The impact of the changes come as the private equity industry faces
unprecedented criticism for not paying its fair share of tax and asset

Further reading:

Unions launch campaign for interest relief reform

Private equity not paying ‘a fair share of corporation

Wellcome Trust throws support behind private equity

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