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Wings clipped

New taxation treatment in respect to carried interest in the UK is the latest move against private equity, says Jon Moulton. But where to next for the industry?

In the past few years regulators have found a rather undeserving target – private equity. The usual purported benefits of transparency, disclosure and control are put forward, without either evidence of genuine benefit or concern for cost. And the regulatory tide simply sweeps in.

Recent months have seen the UK government impose effective taxation on carried interest at an especially high 28% capital gains rate, if you pass a complex set of tests on what you do. Otherwise it is at full income tax rates. Contrast this with the previous position, where if you got decent tax advice on esoteric tax issues, like CGT basis shifting, you could, entirely legally, pay very little or even no tax at all. These were wonderful days for the industry – and my pocket.

Public company CEOs moaned. But now, if anything, their tax position is better than that of private equity titans. And they don’t have to wait anywhere near as long as they did to get their big payday.

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