He’s just abolished sweat equity.
On the carried interest being taxed as a capital gain idea:
I’ve just had a lengthy peer-reviewed paper published in the British Tax Review concluding that there is, in fact, no loophole. Private equity’s nifty tax treatment works only if private equity funds are regarded as passive investors, in the same way as unit trusts or other mutual funds. But if they are carrying on a financial trade, like an investment bank, the executives would have to pay tax at the same rate as everybody else.
Unlike a mutual fund, private equity funds are far from passive investors. They enter into complex acquisition agreements to acquire companies. They actively manage those companies, often restructuring them from top to bottom. They run elaborate auctions to dispose of the companies. And they repeat the whole process again and again.
The level of activity suggests that many funds are carrying on a financial trade, which means HMRC should look carefully at each private equity fund, and apply the law, and not stick to a very political agreement from the 1980s.
Well done, well done. So the management of a start up firm. They gain equity for the work they’re going to over the next few years of building that company. Which, under Neidle’s reading, means that equity must pay income tax rates.
Way to go Danny.