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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4348
Experience:  FCCA FCMA CGMA ACIS
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I have a small investment in a private equity fund and have

Customer Question

I have a small investment in a private equity fund and have received a qualified distribution (upon a refinancing) that is lower than my original investment. Is this declarable at this stage
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Please advise your country of residence. Once I have this information I can advise you further.
Customer: replied 1 year ago.
I am uk resident
Expert:  bigduckontax replied 1 year ago.
Here is the advice from Wikipedia: 'The Finance Act 1972 provided that gains on investments acquired by reason of rights or opportunities offered to individuals as directors or employees were, subject to various exceptions, taxed as income and not capital gains. This may strictly have applied to the carried interests of many venture-capital executives, even if they were partners and not employees of the investing fund, because they were often directors of the investee companies. In 1987, the Inland Revenue and the British Venture Capital Association (BVCA[23]) entered into an agreement which provided that in most circumstances gains on carried interest were not taxed as income.The Finance Act 2003 widened the circumstances in which investment gains were treated as employment-related and therefore taxed as income. In 2003 the Inland Revenue and the BVCA entered into a new agreement which had the effect that, notwithstanding the new legislation, most carried-interest gains continued to be taxed as capital gains and not as income.[24] Such capital gains were generally taxed at 10% as opposed to a 40% rate on income.In 2007, the favorable tax rates on carried interest attracted political controversy.[25] It was said that cleaners paid taxes at a higher rate than the private-equity executives whose offices they cleaned.[26] The outcome was that the capital-gains tax rules were reformed, increasing the rate on gains to 18%, but carried interest continued to be taxed as gains and not as income' For capital gains you have an Annual Exempt Amount (AEA), currently 11.1K, to offset gains which are taxed at 18% or 28% or a combination of the two rates depending on your income in the year including the gain. Such gains should be declared on your annual self assessment tax return. I suspect that this area of investment will attract the Chancellor's attention again in the future! I do hope that you have found my reply of assistance.