Transitional provision do not apply to carried interest

The taxpayers were private equity investors who became entitled to carried interest in 2015-16. HMRC raised capital gains tax assessments on those sums on the basis that they were within the new regime (TCGA 1992 s 103KA et seq) – which applied to carried interest arising on or after 8 July 2015.

The taxpayers said the new legislation was an ‘entirely new CGT regime for the taxation of carried interest’ whose objective was to ‘capture the actual economic gain enjoyed by carried interest holders thereby overriding the outcome which would otherwise have resulted from the previous application of general CGT principles’. They accepted that the threshold for the new rules to apply was met - the carried interest in question did arise after 8 July 2015. However the transitional provision (F(No 2)A 2015 s 43(2)) applied because a proportion of it was ‘in connection with’ disposals...