Windfall: 3i Group’s Simon Borrows
The UK’s top private equity executives took home around £2.7billion in a year amid growing calls for higher taxes on the industry.
A group of 255 dealmakers – including 3i Group’s Simon Borrows and Bridgepoint’s William Jackson – earned a slice of the haul through ‘carried interest’, profit made by executives on successful deals, across the 2020/21 tax year, according to analysis from law firm Macfarlanes.
Carried interest is a key part of private equity pay and can often massively outstrip the base salaries of executives. But its tax status has been the subject of controversy in multiple countries.
At the moment, carried interest is taxed as capital gains – at 28 per cent, compared to the 45 per cent top rate of income tax. This means the UK taxman is estimated to be losing out on around £600million a year.
The Labour party has said it will close the carried interest loophole, adding millions of pounds a year to the Treasury’s coffers.
Labour leader Sir Keir Starmer and shadow chancellor Rachel Reeves have met private equity bosses as they seek investment in the UK.
Macfarlanes has warned higher taxes on carried interest risked sparking an exodus of dealmakers.
‘We just want to get this information out there so Labour look at it and give themselves some wiggle room,’ said head of tax Damien Crossley.
He added: ‘Maybe they can say they have closed a loophole without shooting the golden goose.’
The report said 2,550 executives made £3.4billion in carried interest in 2020/21, and paid £952million in tax.
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