Labour unveils plan to target carried interest taxation

Update (13/04, 15:30pm): in an email to unquote", a Labour spokesperson added that the party would rewrite the memorandum of understanding between HMRC and BVCA, which currently outlines how carried interest is taxed. The changes would "restrict the amount that private equity managers can claim is a gain on their investment when they are only investing small amounts of their own money."

Original story: As part of its "10-Point plan to tackle tax avoidance" revealed on 11 April, Labour stated that it would "re-write the rules which allow private equity managers to get away with paying less tax than ordinary working people even when they have not been investing their own money" following the UK's general election later this year.

unquote" reached out to Labour's press office to clarify the changes being considered, and will update this story as soon as possible.

According to Simon Horner, BVCA's director for Policy and Public Affairs, Labour is not understood to be looking at taxing carried interest as income, as opposed to capital gains. Horner added that Labour is likely to be considering a review of carry taxation based on the degree to which managers put their own money to work in funds - which would tie in with the wording used in the party's announcement.

It is understood that any changes to the tax regime would be dependent on a consultation process with the industry.

Although the issue of carried interest taxation has been expected to be at stake in the run-up to the general election, the 2015 budget didn't introduce major changes to private equity's tax model.

Read more on this topic: Private equity's tax model under scrutiny

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