Treasury to review private equity tax relief

The Treasury is to consider limiting the amount of interest relief available
to private equity, in the most significant sign from the government that it is
prepared to curb the activities of the under-fire industry.

According to the FT
, the review will be announced by economic secretary
Ed Balls in a speech that
he will deliver at London Business School. In the speech Balls will say that
‘rules that apply to the use of shareholder debt where it replaces the equity
element in highly leveraged deals’ need to be re-examined.

Balls will not, however, push for a complete overhaul of the interest relief
regime, which applies to all corporates and is a feature of most developed
economies.

The speech from Balls follows intense criticism of private equity from unions
and politicians, who have accused the industry of failing to pay its fair share
of tax by loading on debt and claiming massive tax cuts on interest relief.

The Treasury
review will consider whether the tax system is working as intended and
investigate whether private equity investors are disguising equity as debt.

Further reading:

Advisers say tax attack on private equity will yield
little

Private equity not paying ‘a fair share of corporation
tax’

Unions launch campaign for interest relief reform