With effect from 8th July, 2015, UK resident investment management executives will pay capital gains tax on all their carried interest returns from investment funds (with the rate currently set at 28% for higher and additional rate taxpayers). The overall rate may in many cases be higher, since items of income such as interest and dividends remain liable to income tax. In addition, those who are not domiciled in the UK (“non-doms”) will no longer be able to benefit from the remittance basis of taxation in relation to their carried interest returns to the extent that they perform the relevant investment management services inside the UK. Further details are set out in our client memorandum of 16th July, 2015 (UK Summer Budget 2015).

Since the release of the new rules in the July Finance Bill, HM Revenue & Customs have published guidance on how the new rules will be operated. This is somewhat helpful, and indicates that the test for how much of a person’s carried interest returns will be attributed to UK services will be more of a holistic test looking at all the facts and circumstances, rather than looking strictly at the number of days spent in each territory. That said, the example in the guidance looks at a very clear-cut case, and all non-dom UK resident investment management professionals should consider how they may be affected by these new provisions.

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Photo of Robert E. Gaut Robert E. Gaut

Robert Gaut is a tax partner and head of our UK tax practice in London.

Robert provides advice on a full range of UK and international tax issues relating to fund formation, private equity deals, finance transactions and private equity real estate matters…

Robert Gaut is a tax partner and head of our UK tax practice in London.

Robert provides advice on a full range of UK and international tax issues relating to fund formation, private equity deals, finance transactions and private equity real estate matters, including experience with non-traditional equity transactions, such as debt-like preferred equity and co-investments for private credit investors.

Robert is highly-regarded for his ability to provide sophisticated tax advice to many of the world’s preeminent multinational companies, sovereign wealth funds, investment banks and private equity and credit funds. Clients have commented to legal directories that Robert is “really technical and knows his stuff,” and “has a very strong knowledge of the various tax laws, but also presents more innovative techniques and strategies.”

He is consistently recognized by Chambers UK and The Legal 500 United Kingdom, and has been recognized by Chambers Global as a leading individual in tax. The Legal 500 comments that Robert has “vast experience in a range of matters, including corporate tax structuring, real estate tax and fund formation.”