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British Prime Minister Rachel Reeves will not impose a top tax rate of 45p on private equity leaders in this month’s Budget as she seeks a compromise solution that closes tax “loopholes” that keep investors out of the UK. It is expected that there will be no.
Mr Reeves told the Financial Times ahead of an international investment summit attended by around 250 major investors in London next week that he was not “ideological” about taxing the wealthy.
Senior government officials said the chancellor was seeking a “compromise” on taxing private equity executives to raise money but not to the extent that it would hurt Britain’s competitiveness.
“We need to approach this in a responsible way and not reduce investment in the UK,” Mr Reeves said in an interview with the FT on Friday.
A portion of a private equity manager’s compensation is paid through carried interest. This means that if the Fund achieves returns above a certain level, you will receive a portion of the Fund’s investment income.
In the UK, this is taxed at a rate of 28 per cent as a capital gain rather than as income, with a top rate of 45 per cent plus national insurance.
One government source said Labor’s manifesto only promised Reeves to close tax loopholes and did not require him to raise the tax rate to 45%. Another said: “We’ll compromise on this.”
“Private equity is the only industry where performance-based pay is treated as capital gains,” Labour’s election plan states. Labor will close this loophole. ‘The party intends to raise £565m a year by taking such measures and is consulting with industry on the issue.
The Prime Minister told the FT in June, before the general election, that Labor would continue the UK’s tax breaks for private equity executives if fund managers put their capital at risk.
But he said UK private equity heads were currently investing “a small amount” of their own money, an amount that “many other countries would need to do” to qualify for preferential tax treatment. “It’s lower than the amount that will be paid,” he added.
Michael Moore, chief executive of the UK Private Equity and Venture Capital Association, said it was important that any new structure be “globally competitive”.
Industry insiders say the UK could start to lose out to other countries such as the US, Italy, Spain and France if the current tax rate of 28% on carried interest rises above the “low 30s” range.
The Treasury Department declined to comment on tax speculation, but said: “We will reform the tax treatment of carried interest, recognizing that the world’s leading asset management industry plays an important role in attracting investment. “We are committed to achieving equity in this area of the tax system.” All over the UK. ”
Mr Reeves and Chancellor Keir Starmer will roll out the red carpet for investors at a summit in London on October 14, but reassured guests there will be no major tax increases in the Budget on October 30. There is pressure to do so.
Some business people have criticized the timing of the event. The absence of Blackstone’s Stephen Schwartzman and JPMorgan Chase & Co.’s Jamie Dimon has fueled speculation that there will be some sort of rumblings.
But people close to the event said it was “totally oversubscribed” and CEOs were being turned away. Attendees included Goldman Sachs CEO David Solomon, former Google CEO Eric Schmidt, and BlackRock Chairman and CEO Larry Fink. , Novo Nordisk Chairman Helge Lund, among others.
Mr Reeves said: “Heathrow Airport will need to expand its VIP section in mid-October to accommodate the number of high-net-worth travelers arriving that week.” We’re really excited about the caliber of our people and the amount of capital they’re managing. ”
A person familiar with the preparations said the airport was preparing for a large influx of visitors to VIP suites. This requires more staff than usual and the right amount of food and drink.
Meanwhile, the Treasury Department denied an Observer report that Mr. Reeves could delay the end of tax breaks for private schools. A spokesperson said, “The new law will go into effect on January 1 as planned.”
