Non-UK domiciled individual PE executives
The new rules determining how non-UK domiciled individuals and non-resident trusts are taxed have been in force since 6 April 2017 and HMRC finally published its long-awaited guidance note on 31 January 2018.
Private equity fund executives who receive carried interest and or disguised fees (whether directly or indirectly via a trust structure) will need to overlay the complexity of the rules for these specific regimes when working through the changes. For example, whilst there are many others, here are four specific examples to think about:
- We do not think rebasing should apply to carried interest but may apply to self-funded co-investments.
- Executives with carried interest in a protected trust may continue to be subject to 28% capital gains tax as carried interest arises in the trust but it could still remain a favourable structure in many cases.
- The ‘un-mixing’ of tainted funds may be possible where an executive holds fund interests personally and holds bank accounts which contain a mixture of their various income and capital cash flows.
- To the extent an executive can still claim the remittance basis, we would recommend they keep full records of their non-UK workdays to support any remittance basis claims in relation to the non-UK element of their carried interest capital gains.
We would recommend executives review their structures on a case by case basis as the best actions may depend on their personal circumstances.
Read our guide to the tax changes for non-UK domiciliaries.
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