Taxation of Chargeable Gains Act 1992 section 103KA

Carried interest

Section 103KA sets out the capital gains tax treatment of carried interest received by individuals who perform investment management services for investment schemes through arrangements involving at least one partnership.

• Where carried interest arises to an individual fund manager, the full amount (less narrowly defined permitted deductions) is treated as a chargeable gain for CGT purposes, whether or not it relates to disposals of partnership assets
• The rules do not apply to the extent that carried interest is already taxed as trading income or represents a repayment or return on a genuine co-investment made on arm's length terms
• Permitted deductions are limited to cash paid for the right to carried interest, amounts already charged to income tax as employment earnings on acquiring those rights, and amounts counting as income under the employment-related securities rules
• Where an individual acquired the right to carried interest by paying money to another person, a claim can be made to reduce the chargeable gain by the amount of that consideration