IFM37130 - Overview: Charging provisions and capital gains tax rate

Charging provisions & Capital gains tax rate

TCGA92/S1H(9)

TCGA92/S103KA - KH focuses solely on the calculation of a chargeable gain arising from carried interest received by an individual who performs investment management services directly or indirectly in respect of an investment scheme under arrangements involving at least one partnership.

Capital Gains Tax rate - Prior to 6 April 2016

The capital gains tax (CGT) rate prior to 6 April 2016 was 28% or 18% to the extent that an individual had any unused part of the basic rate band.  Further details can be found at CG21000.

Capital Gains Tax rate - From 6 April 2016

Finance Act 2016 introduced a reduction in the CGT rates for most assets. The 18% rate was reduced to 10% and the 28% rate was reduced to 20%. However the 18% and 28% rates were retained for "upper rate gains" (TCGA92/S4(2A)).

"Carried interest gains" are upper rate gains.  Therefore the higher 18% and 28% rates still apply.

In circumstances where carried interest gains arise to an individual outside of a partnership structure then the gain is still taxed at those higher rates but not according to the carried interest rules.  This is the effect of TCGA92/S1H(9)(b).

In summary, no matter the type of entity involved when carried interest arises to an individual, the rate of capital gains tax chargeable will be 18% and 28%.