The legislative measures relating to investment managers and their performance linked rewards in the UK government's Finance Bill 2016 have been published.

The UK government has published a draft of the “Investment managers: performance linked rewards” legislative measure, which will form part of the upcoming Finance Bill 2016.

The measure specifically deals with whether carried interest should be taxed as capital gains or income. It proposes that this should be based on the length of the average period for which the fund holds the assets.

The measures form part of a wider topic within the bill entitled “Tax avoidance, evasion and compliance”.

Apart from select measures of the bill that came into effect on November 25 2015, the date when the first draft was published, the full text is planned to come into effect on April 6 2016.

The British Private Equity & Venture Capital Association has commented upon the “Investment managers: performance linked rewards” legislative measures and has three proposals for modification:

  • the holding period between short and long term investment should be three years rather than the four proposed to reflect the impact of the economic cycle on industry activity;
  • more work should be done to protect the venture and growth capital sectors where minority stakes are normal; and
  • the wording around controlling stakes needs to be addressed to better reflect economic practice.