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Private equity industry can breathe a sigh of relief in the light of a recent HMRC statement on ratchet arrangements, says SARA COHEN.
Private equity industry can breathe a sigh of relief in the light of a recent HMRC statement on ratchet arrangements says SARA COHEN.
CERTAINTY OF TAX treatment for management shareholders in highly-geared companies has been restored in a welcome statement published by HMRC on 21 August 2006. It also restored certainty of tax treatment for management shareholders who can benefit from ratchet arrangements if their companies perform well. HMRC have confirmed that there will be no income tax and National Insurance charge under ITEPA Part 7 Chapter 4 which imposes a charge on post-acquisition benefits. However although the position is clear for the moment HMRC are still in talks with the British Venture Capital Association and there is always the risk of legislative change which could alter the current status quo so the relief may be short-lived.
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