The CIOT has published its response to the government's call for evidence on the tax treatment of carried interest 2024.
The key points raised in the CIOT response include:
the distinction between income and capital gains is complex, with blurred boundaries and is ultimately a political judgement whether carried interest should be taxed as income or capital gains;
suggesting defining a statutory ‘safe harbour’ to determine when carried interest should be taxed as capital gains, based on factors such as commitment of capital, participation in management, and genuine profit-related reward;
urging the government to consider the potential implications of any changes on the UK's competitiveness and position within the global market, noting that the current UK capital gains tax rate is broadly in line with other European countries;
recommending improving the clarity of the disguised investment management fee rules, particularly regarding their application to non-resident companies and trusts, and addressing potential economic double taxation; and
the territorial aspects of the rules, such as the tax treatment of individuals moving to or from the UK during the relevant period should also be considered.
The CIOT has published its response to the government's call for evidence on the tax treatment of carried interest 2024.
The key points raised in the CIOT response include:
the distinction between income and capital gains is complex, with blurred boundaries and is ultimately a political judgement whether carried interest should be taxed as income or capital gains;
suggesting defining a statutory ‘safe harbour’ to determine when carried interest should be taxed as capital gains, based on factors such as commitment of capital, participation in management, and genuine profit-related reward;
urging the government to consider the potential implications of any changes on the UK's competitiveness and position within the global market, noting that the current UK capital gains tax rate is broadly in line with other European countries;
recommending improving the clarity of the disguised investment management fee rules, particularly regarding their application to non-resident companies and trusts, and addressing potential economic double taxation; and
the territorial aspects of the rules, such as the tax treatment of individuals moving to or from the UK during the relevant period should also be considered.
