The Treasury has closed a tax loophole that had allowed investment fund managers to “avoid paying the correct amount of capital gains tax (CGT)”.
As part of a range of measures designed to tackle tax avoidance and evasion, chancellor George Osborne today announced a change in the way “carried interest” is dealt with.
Fund managers will no longer be allowed to avoid CGT “on the profits of the fund payable to them (known as carried interest)”.
The Budget document added: “The government continues to support the asset management industry in the UK, and considers that carried interest should be subject to CGT, as it reflects the underlying long term performance of a fund’s investments.”
It added: “This measure will have immediate effect by requiring taxpayers who receive carried interest to pay the full 28 per cent CGT charge on their award. Asset managers will no longer be able to use tax planning to reduce the value of the gain.”
The chancellor also announced a consultation on “the circumstances in which fund managers’ performance-related returns are to benefit from CGT treatment.
“The consultation will set out and clarify the circumstances in which performance fees arising to fund managers from management activities will be capital in nature.”