Buzz Archive:
Private Equity Taxation in the UK

by SJ Berwin, 9/18/2007

While the carried interest debate has quieted recently in Washington DC--it continues to be debated in the EU--particularly in the UK. Which is why it's important to watch the issue closely, especially how the BVCA (British Private Equity and Venture Capital Assn.) reacts--or should I say how the BVCA has played their hand pro-actively (hint hint to our US counterparts).

The BVCA has clearly identified the reasons why it is appropriate to charge venture and private equity as capital gains tax, which include: the significant co-investments made by executives as a condition of getting a carried interest (usually a very high proportion of the individual's net worth), the entrepreneurial nature of private equity ownership, and the fact that full income tax is paid on the market salaries received by executives. They also say that around half of funds never pay any carried interest at all, and that one in four loses capital, highlighting the speculative nature of the interest.

This week, pan-European law firm SJ Berwin delivers a comprehensive look at the history, the politics, the policy and the likely outcomes of the debate.