Ceinwen Rees and Richard Ward (Debevoise & Plimpton) explain how the UK’s anti-hybrid rules may apply to a complex international private equity fund.
Question
My client is a private equity fund that has debt funded a UK company (UKCo) through a Luxembourg holding company (LuxCo). LuxCo is funded using preferred equity certificates (PECs) interest will accrue under the PECs until the investment is disposed of. The fund is a Luxembourg SCSp the limited partners are a mixture of US taxable and tax exempt and UK taxable investors. I am concerned that the UK anti-hybrid rules may apply to this structure but I’m not sure where to start.
Answer
You are right to be concerned. A number of warning flags arise under this structure:
PECs may...
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Ceinwen Rees and Richard Ward (Debevoise & Plimpton) explain how the UK’s anti-hybrid rules may apply to a complex international private equity fund.
Question
My client is a private equity fund that has debt funded a UK company (UKCo) through a Luxembourg holding company (LuxCo). LuxCo is funded using preferred equity certificates (PECs) interest will accrue under the PECs until the investment is disposed of. The fund is a Luxembourg SCSp the limited partners are a mixture of US taxable and tax exempt and UK taxable investors. I am concerned that the UK anti-hybrid rules may apply to this structure but I’m not sure where to start.
Answer
You are right to be concerned. A number of warning flags arise under this structure:
PECs may...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
