It will come as little consolation to Guy Hands, the financier who complained this week that he must be the last person in Britain still prepared to defend the private equity industry’s generous tax breaks. But I have a confession to make: I, too, am opposed to clobbering private equity funds — and if that makes us fellow champions of a lost cause, then so be it.
The current rather weird tax regime would admittedly never be chosen by someone redesigning it from scratch — but in the present climate, any change will succeed only in punishing one of Britain’s most successful industries while raising little or no revenue for the Exchequer. Trade unions’ calls for huge tax rises on the industry must be resisted.
Partners in private equity funds such as Permira or KKR often earn a 20 per cent cut of any profits from restructuring, turning around and reselling the businesses they buy out: their share of the swag is called ‘carry’ or ‘carried interest’.
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