Private equity industry will fight CGT hike

CONCERNS are mounting in the business world over the scope of the government’s proposed hikes to capital gains tax (CGT), as lobbying intensified ahead of the emergency Budget next week.

The latest form of income to come under the spotlight is the so-called “carried interest”, or share of profits, that private equity bosses receive as compensation for their investments.

The Tories have signalled that increased CGT rates will hit “non-business” assets, with at least a degree of relief provided for entrepreneurs in order to protect investment in the UK economy. But carried interest is likely to fall outside the scope of a “business” asset, a move senior private equity industry figures have vehemently denounced.

The British Venture Capital and Private Equity Association (BVCA) has officially given its backing to City A.M.’s campaign against the government bringing CGT into line with income tax.

“London has established itself as a global centre for private equity and venture capital, but we will be made less competitive and less attractive by any increase in what is already a relatively high CGT rate,” BVCA chief executive Simon Walker said.

“What investors need above all is certainty and stability – this could potentially be extremely damaging.”

This newspaper argues that a better system would be to tax short term gains in line with income at 40 per cent and then taper CGT down to zero per cent after five years to encourage long-term investment in the economy.

The campaign has already received the backing of a number of high-profile City individuals, including private equity guru Jon Moulton, the founder of Better Capital.