Taxation of Chargeable Gains Act 1992 section 103KE

Carried interest: avoidance of double taxation

Section 103KE provides a mechanism for individuals to claim relief where capital gains tax charged on carried interest would otherwise result in a double tax charge because other tax has already been paid on the same carried interest.

• Where CGT is charged on carried interest and other tax (such as income tax) has already been paid on that same interest — either by the individual or by another person — the individual can claim adjustments to avoid being taxed twice on the same amount.
• The value of any adjustment cannot exceed the lower of the CGT charged on the carried interest and the other tax already paid, and no relief is available where the amount taxed qualifies as a permissible deduction in computing the chargeable gain.
• HMRC will make only those adjustments that are just and reasonable, and relief is determined on an item-by-item basis — the other tax paid on a particular component of the carried interest can only be set against the CGT due on that same component, not against the CGT on the total sum.
• The individual may also elect to reduce the annual exempt amount deduction for the relevant year by an amount up to the other tax already charged, and adjustments can be made for any period, by any method, and without regard to normal time limits.