For certain individuals in the private equity industry, certain carried interests were originally assessable to capital gains tax at more favourable rates. However, the Finance (no.2) Act 2015 introduced a higher rate of charge on such carried interests effective from 8 July 2015. As part of the introduction of this new rate of tax, transitional rules were put into place to protect certain transactions occurring prior to the change, but were not realised for commercial reasons until after the new rules were implemented.
The above transitional rules are to be scrapped with effect from Budget Day such that all disposals of carried interests arising after 22 November 2017 will only be chargeable to the higher rate of capital gains tax, irrespective of when the original disposals took place for the purposes of these rules.
All individuals within the private equity and investment management industry who benefit from carried interests will now be subject to the new rules only. This will bring a degree of simplification to the calculation of the taxable gains subject to the higher charge.