Private Equity Fund Managers

[tractorian]

On Thursday or Friday of last week, on Radio 4, a delegate to the Labour Party Conference explained that some payment or other would be funded by taxing the "non-dom wealthy and Private Equity Fund Managers." What exactly are the latter doing to attract this?

[DrFfybes]

Looking at the performance of many of them, "Bugger All".

[SalvorHardin]

On Thursday or Friday of last week, on Radio 4, a delegate to the Labour Party Conference explained that some payment or other would be funded by taxing the "non-dom wealthy and Private Equity Fund Managers." What exactly are the latter doing to attract this?

Private Equity managers (and some other fund managers) make quite a bit of money via "carried interest". This is their share of the profits generated by the investments that they manage (their funds typically charge a percentage fee and then a proportion of all profits earned above the fund's benchmark). These are normally called performance fees.

Carried interest profits are taxed at capital gains rates. Labour propose to tax carried interest at income tax rates, which are much higher, and to charge National Insurance as well.

"Investment partners can legitimately avoid Income Tax and National Insurance Contributions (NICs) by having their profits taxed under the Capital Gains Tax (CGT) regime."

https://www.rossmartin.co.uk/partnerships/1827-tax-loophole-tax-on-carried-interests

EDIT - just put a bracket in the second sentence after "benchmark"

[tractorian]

Whow! Now, why didn't I know that?

More importantly, will this have any effect on the performance of the Funds/Trusts?

[SebsCat]

HMRC have recently admitted that the carried interest loophole does not exist for private equity buyout funds, see https://www.taxpolicy.org.uk/2023/10/06/deadcarry/. So expect many PE managers to be paying more tax regardless of whether Labour win or not.