The following Tax guidance note provides comprehensive and up to date legal information covering:
The income-based carried interest (IBCI) rules form part of the legislation which governs the tax treatment of rewards received by fund managers. The IBCI rules attempt to ensure that only carried interest returns that arise from long-term investment activity can benefit from capital gains tax (CGT) treatment.
The IBCI rules were introduced in Finance Act 2016 (FA 2016) and followed the enactment of anti-avoidance legislation targeted at investment fund managers and known as the ‘disguised investment management fee’ (DIMF) rules.
This Practice Note explains:
how the IBCI and DIMF rules fit together
how the IBCI rules work
how to calculate the average holding period
when the average holding period may be modified
how direct lending funds are treated
when carried interest can be treated as conditionally exempt, and
what happens when the IBCI rules do not apply
For a detailed analysis of the DIMF rules, see Practice Note: Disguised investment management fee rules and for more information on the taxation of carried interest generally, see Practice Note: Taxation of carried interest holders in a private equity fund
The DIMF rules were enacted in Finance Act 2015 to target specific tax planning arrangements used by investment fund managers (particularly private equity fund managers). The planning arrangements broadly attempted to provide part of the management fee due
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