‘Why should wealthy private equity investors be allowed to pay a lower rate of tax than a nurse or bus driver?’
A legal challenge has been launched against HMRC to demand the closure of a loophole that allows private equity fund managers to pay almost half the tax they should.
Abolishing the tax loophole could collect an estimated £600 million more in revenue each year from the non-ministerial department, as the loophole allows equity managers to slash the tax on their seven and eight figure salaries.
The ‘carried interest’ loophole was introduced by HMRC following successful lobbying by the private equity industry in 1987, which meant these executive managers’ returns are taxed as capital gains, at 28%, rather than trading income at 40%.
Campaign organisation the Good Law Project is bringing the case to court, along with British ‘green energy’ industrialist Dale Vince, founder of Ecotricity.
Vince, who hit the headlines recently for his donations to both Just Stop Oil and the Labour Party, said it was ‘morally wrong’ that a wealthy private equity investor is allowed to pay a lower tax rate than a nurse or bus driver.
He is also a member of Patriotic Millionaires UK, a non-partisan network of British millionaires who say their mission is to ensure that those with wealth are making their fair and proper tax contribution.
Vince stated: “The rules exist to take more tax from private equity investors, but HMRC are not using them. I want to know why. The revenue could be in the region of £600m – an amount no one should ignore.
“Why should wealthy private equity investors be allowed to pay a lower rate of tax than a nurse or bus driver? I believe it is morally wrong and it needs to change.”
Another member of Patriotic Millionaires, Phil White, said: “Private equity firms are well known for single-mindedly optimising returns to themselves and this is yet another example of how the dice are loaded in their favour and against the interests of the rest of society.”
Jo Maugham, founder of Good Law Project condemned the loophole as evidence of unfair treatment favouring those that hold the most power.
“If you ran a small business, or received income support, or were pushed by an agency to take your pay as loans you wouldn’t get special treatment like this,” Maugham reflected.
“This is, I feel sad to have to say, another example of our institutions being strong with the weak – but weak with the strong.”
Over 73,000 people signed the Good Law Project’s initial petition demanding that HMRC close the loophole rather than, ‘giving special favours to some of the wealthiest people around’.
(Photo credit: LBC / YouTube Screenshot)