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Carried interest taxation: the European landscape

Ceinwen Rees and George Apps (Macfarlanes) compare the UK’s carried interest regime to European models.

Fund economics 101

Before we dive into an analysis of the taxation of carried interest we thought it would be helpful to set out a primer on fund economics and how carried interest fits into the wider fund landscape.

Limited partners in a closed-ended fund will commit a certain amount of capital to the fund. This capital is drawn down by the fund as and when it is needed for investment purposes. During the life of the fund the manager will be remunerated for investment management services via an investment management fee. This fee is typically a percentage (e.g. 2%) of invested or committed capital.

In addition to receiving a management fee the fund manager the investment team or a combination of the two will also receive...

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