Set out below are two Memoranda of Understanding agreed between the Inland Revenue and the Taxation Committee of the BVCA covering the income tax treatment of management equity in private equity transactions, the use of limited partnerships as private equity investment funds and associated matters.
If you require further advice or information about the Memoranda of Understanding you should consult your own professional advisers.
The legislation in Schedule 22, Finance Act 2003 is designed to deliver the policy of subjecting to tax, and national insurance contributions, value obtained as a result of acquiring securities by reason of employment. The legislation is designed to ensure that value from capital growth is not caught. However, in complex arrangements, such as those described in these memoranda, the divide between capital growth and value obtained as an employee is not easily identifiable. These memoranda have been drawn up to give some clarity in this area for the majority of straightforward cases. Where the circumstances of any particular case are different then the tax consequences will need to be considered in the light of the particular facts.
Income tax treatment of managers' equity investments in VC-backed companies
Income tax treatment of PE and VC limited partnerships and carried interest
The BVCA and its employees, Council and committee members accept no responsibility of any kind for any action taken by any person as a result of these memoranda.