Carried interest: Millican unCheyned

Mr Millican received promote as principal of an operating partner in a real estate JV. The other party was a US fund. He filed on the basis that his return from the transaction was an ordinary capital gain and benefitted from the base cost shift. HMRC assessed him to tax on the basis that his return was carried interest. The First-tier Tribunal found in favour of Mr Millican, finding that although he had performed investment management services, these were not provided in respect of a collective investment scheme (although the tribunal hinted that HMRC may have been incorrect to concede that the JV partnership was not in fact a collective investment scheme). It was not enough in the tribunal’s view that a fund was one of the JV partners. The case explores the meaning of several concepts which are significant for various aspects of the UK taxation of investment funds.