Further Change to the UK Taxation of Carried Interest

December 22, 2015

The UK Government, as anticipated, issued draft legislation on 9 December designed to establish clear rules as to when carried interest can qualify for favourable capital gains tax treatment. The draft legislation follows a consultation exercise announced in the Summer Budget.

The Summer consultation paper issued by H.M. Revenue & Customs (HMRC) initially proposed two alternative methods for determining when carried interest could qualify for capital gains tax treatment. The first method looked to the fund’s investment strategy or proposed activities (so-called Option 1), while the second method looked to the average holding period of underlying assets (so-called Option 2). The draft legislation confirms that Option 2 is the favoured option.

Read "Further Change to the UK Taxation of Carried Interest."