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Oooooh, this is fun

So, the Ritblat tax dispute:

The HMRC dispute dates to 2007. That’s when Delancey raised €1.5 billion for its flagship DV4 fund — the vehicle it went on to use for deals such as the break-up of Minerva, the listed company that owned the Walbrook building in the City. At the same time, an employee benefit trust (EBT) was set up to hold senior Delancey staff’s performance rewards from the fund, known as carried interest. Those beneficiaries were, in effect, entitled to 20 per cent of the fund’s profits above a 7 per cent annual hurdle rate.

That’s the same basic structure that Julian Richer used – entirely, wholly and undoubtedly fully legally – to sell Richer Sounds to his employees without having to pay CGT on the income therefrom. The employees’ benefit trust.

Fun, eh?

6 thoughts on “Oooooh, this is fun”

  1. Trusts; alleged tax avoidance? I thought it must be an article from the Guardian, wot wiv them being experts in the field.

  2. It’s highly likely that the description of the carry is too low. They probably get 20 from the first pound of profit, provided the seven per cent is reached.

  3. Kjerulf – god only knows how accurate the description is, but start with £100, hurdle rate is 7%, they’ll be getting 20% of anything over £107 at the end of the year. So, get to £110, it’ll be 20% of 3 squid per 100.

  4. Will I one day surpass the master though?

    Did we note how Tim the Magnificent trolled lil’ ol’ me with a single word a few posts ago? How great a school is this site?

  5. Ducky dear, unless you have access to the fund agreement and therefore know the specifics of the fund in question, please note that for casual observers such as Mr. Worstall, “hurdle” is a vernacular term that covers two methods of calculating. “True hurdle” does indeed work the way you describe. While “preferred return” works the way I describe. Even seasoned PE pros use the term “hurdle” for both. Until they have to write them down….

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