Incentivising managers in a tax-efficient way has always been a challenge for the funds industry, and carried interest structures have traditionally been a popular means of ensuring managers have a stake in the performance of the investments they manage without being taxed at unfavourable income tax rates on returns from those investments. The taxation of gains received by managers under these structures, as capital gains rather than trading income, is determined by HMRC’s 1987 agreement with the BVCA and a subsequent memorandum of understanding. However, this is now being questioned and the recent crusade against carried interest and its vilification in the press are already encouraging consideration of alternative incentivisation structures. One such alternative which is particularly worthy of attention, on the basis that the pre-tax economics can be structured to be very similar to carried interest, is growth shares.
If you are not a subscriber, subscribe now to read this content.
Incentivising managers in a tax-efficient way has always been a challenge for the funds industry, and carried interest structures have traditionally been a popular means of ensuring managers have a stake in the performance of the investments they manage without being taxed at unfavourable income tax rates on returns from those investments. The taxation of gains received by managers under these structures, as capital gains rather than trading income, is determined by HMRC’s 1987 agreement with the BVCA and a subsequent memorandum of understanding. However, this is now being questioned and the recent crusade against carried interest and its vilification in the press are already encouraging consideration of alternative incentivisation structures. One such alternative which is particularly worthy of attention, on the basis that the pre-tax economics can be structured to be very similar to carried interest, is growth shares.
If you are not a subscriber, subscribe now to read this content.
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
