Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the potential competitive threat to the UK economy of treating carried interest arising from the management of private equity funds as income rather than capital; and what plans the Office for Tax Simplification has to investigate this issue.

The Government recognises that a competitive financial services sector in the UK, which includes the management of private equity funds, is an important part of attracting investment and driving growth.

The UK’s approach to the taxation of carried interest remains in line with most other G7 countries. It seeks to ensure that returns are taxed in line with their character and taxed at rates which appropriately balance the need to raise revenue with the importance of maintaining the UK’s competitiveness for fund management.

The OTS is undertaking a review of CGT and aspects of the taxation of chargeable gains. The review will recommend ways to simplify the tax system in line with the statutory role of the OTS.