Income Tax Act 2007 section 809FZT

Carried interest which ceases to be conditionally exempt

Section 809FZT deals with when conditionally exempt carried interest loses its exemption from income tax, and the tax consequences that follow.

• Conditional exemption expires at the earliest of several trigger events, including the scheme winding up, four years after the scheme stops investing, or four years (ten years for realisation model schemes) from when the carried interest arose to the individual
• Once exemption is lost, the carried interest is reviewed to determine whether it should have been taxed as income-based carried interest at the time it originally arose
• HMRC will make all necessary tax assessments and adjustments to reflect any reclassification from capital to income
• Any capital gains tax already paid on the carried interest is credited against any resulting income tax liability, preventing double taxation