Income Tax Act 2007

[F1 809FZS Conditionally exempt carried interest U.K.

(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.]

Textual Amendments

F1 Pt. 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)