Textual Amendments
F1Pt. 13 Ch. 5F inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2)
(1)Carried interest which—
(a)arises to an individual from an investment scheme, and
(b)is conditionally exempt from income tax,
is to be treated as if it were not income-based carried interest to any extent.
(2)Carried interest is conditionally exempt from income tax if Conditions A to D are met.
(3)Condition A is that the carried interest arises to the individual in the period of—
(a)four years beginning with the day on which the scheme starts to invest, or
(b)ten years beginning with that day if the carried interest is calculated on the realisation model.
(4)Condition B is that the carried interest would, apart from this section, be income-based carried interest to any extent.
(5)Condition C is that it is reasonable to suppose that, were the carried interest to arise to the individual at the relevant time (but by reference to the same relevant investments), it would not be income-based carried interest to any extent.
(6)The “relevant time” is whichever is the earliest of—
(a)the time when it is reasonable to suppose that the investment scheme will be wound up;
(b)the end of the period of four years beginning with the time when it is reasonable to suppose that the scheme will cease to invest;
(c)the end of the period of—
(i)four years beginning with the day on which the sum of carried interest arises to the individual, or
(ii)ten years beginning with that day if the carried interest was calculated on the realisation model;
(d)the end of the period of four years beginning with the end of the period by reference to which the amount of the carried interest was determined.
(7)Subsection (5) does not affect what would otherwise be the time at which an investment is disposed of for the purposes of this Chapter.
(8)Condition D is that the individual makes a claim under this section for the carried interest to be conditionally exempt from income tax.
(1)Carried interest which is conditionally exempt from income tax ceases to be conditionally exempt from income tax at whichever is the earliest of—
(a)the time when the investment scheme is wound up;
(b)the end of the period of four years beginning with the time the scheme ceases to invest;
(c)the end of the period of—
(i)four years beginning with the day on which the sum of carried interest arises to the individual, or
(ii)ten years beginning with that day if the carried interest was calculated on the realisation model;
(d)the end of the period of four years beginning with the end of the period by reference to which the amount of the carried interest is determined;
(e)the time at which Condition C in section 809FZS(5) ceases to be met.
(2)Carried interest which ceases to be conditionally exempt from income tax is to be treated as having been income-based carried interest at the time it arose to the individual if or to the extent that, had it arisen to the individual at the time it ceased to be conditionally exempt (but in relation to the same relevant investments) it would have been income-based carried interest.
(3)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (2).
(4)Any amount paid by way of capital gains tax in respect of carried interest which is conditionally exempt from income tax is to be treated as if it had been paid in respect of any income tax liability arising under subsection (2).]