Thursday, 28 June 2007

Another Myners strike


Last week he stuck the boot into buyouts at the TUC trustee conference, now the Telegraph reports he is having a go at the taxation of carried interest:

One of Gordon Brown's favourite businessmen is calling for the money earned by private equity partners from the success of funds they manage to be taxed at 40pc rather than the current 10pc rate.

Paul Myners, who donated £12,700 of his own money to help Mr Brown become Labour leader, believes that carried interest payments are "income related to employment and should be taxed as such in this country at the appropriate marginal rate".

In a submission to the House of Commons Treasury Select Committee Inquiry into Private Equity delivered yesterday, the former chairman of Marks & Spencer argues that it is for general partners of private equity houses to challenge his conclusion on carried interest. This is their share of the profit - typically 20pc - generated through a private equity fund.

Currently, carried interest investments, if held for two years, are eligible for just 10pc capital gains tax under taper relief rules introduced by Mr Brown when he was Chancellor.

Mr Myners has chaired two Treasury reviews at the request of the former Chancellor, and his comments are one of the clearest indications yet that the status quo surrounding tax and private equity is unlikely to continue.

His comments on carried interest are complex, but he believes that "carried interest is a reward for employment and management performance rather than risk-taking and should, accordingly be treated as income in the same way that bonus payments to employees in most other industries are treated as income".

However, he does not believe that profits on partners' personal equity investments should attract 40pc tax.

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