Rachel Reeves was warned that closing the private equity loophole, which would raise at least PS500m, could lead to a mass exodus of rich individuals and reduce the revenue that the chancellor hoped to generate.
EY, a professional services company, said that 60% of its clients in asset management had requested it to work on moving their domicile outside of Britain due to the proposed changes.
EY’s answer to Treasury’s request for evidence in response to government plans to change how people working in private equity will pay capital gains taxes (CGT) instead of income tax on their investment profits — also known as carrying interest. Treasury analysis indicates that approximately 3,000 people will receive carried interest by 2022. They would pay a tax of up to 28% instead of income tax. The highest tax rate is 45%.
EY has responded to the Government’s request for evidence regarding planned changes to Capital Gains Tax
Chris Sanger said that there was a lot of concern about the changes to carried interest rules. However, he stressed that it wasn’t clear how many people were moving.
It is unclear how the system will be changed. Rumors have circulated that the chancellor may increase the CGT top rate. She may also stipulate that people must invest their money in a particular fund, rather than being given a stake as part of employment, to continue to be eligible for CGT. Treasury announced that it launched the evidence call so “a variety of stakeholders” could provide their opinions.
Separately the CBI employers body warned the government about its plans to give more rights to workers in the workplace. This could cause uncertainty within the industry. CBI survey found that 62% of employers expected the UK to become less attractive for investment over the next five-year period.
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