On 31 January 2025, the ACC and AIMA submitted their response to HM Treasury’s consultation on carried interest qualifying conditions. The response follows extensive engagement with HMT and HMRC and highlights concerns about the potential impact of the proposed changes on the UK’s asset management sector.

The ACC and AIMA strongly caution against the introduction of a co-investment requirement or a minimum holding period, arguing that such measures would add complexity, create unintended consequences, and risk undermining the UK’s competitiveness in global asset management.

Key points from the response:

• Opposition to a Co-Investment Requirement: The response notes that investor expectations around co-investment vary widely across funds and strategies. Mandating a set percentage through tax legislation would be disproportionate, impractical, and could disrupt existing market structures.
• Challenges with a Time-Based Condition: Private credit funds already align incentives with investors through long-term investment structures, making a holding period requirement redundant. Existing anti-avoidance provisions, such as those under the disguised investment management fee (DIMF) rules, already prevent misuse.
• Concerns Over Regulatory Complexity: The UK is a leading hub for private credit in Europe, and introducing rigid qualifying conditions would make tax treatment inconsistent across strategies, discouraging investment and reducing flexibility.

The ACC and AIMA will continue engaging with HMT and HMRC to ensure any reforms strike the right balance between regulatory oversight and market competitiveness.

For further information please contact Nicholas Smith ([email protected])