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Budget changes on carried interest

Gains arising on or after 8 July via carried interest are subject to new computational rules. Essentially an affected individual will be taxed by reference to the full amount received less any sums actually invested by that individual. Whilst a capital gains treatment is preserved it is intended that gains will be calculated in line with the economic benefit.
This changes long-standing practices relating to base cost allocation contained within Statement of Practice D12 which until today could result in significant reductions in the effective rate of tax for carried interest. At the heart of this reduction is the base cost shift which occurs upon changes in profit sharing; partners with an increasing profit share (i.e. the investment manager whose carried interest entitlement arises) obtain a proportion of available base cost in the underlying asset from the corresponding partners whose...

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