At a conference with private equity and venture capital leaders today, the government sought to maintain a cooperative tone, despite underlying tension surrounding Labour’s plans to close a £500 million tax loophole benefiting industry executives.
City Minister Tulip Siddiq, speaking at the British Private Equity & Venture Capital Association (BVCA) Summit, called for “action and collaboration” between the government and the private sector.
She emphasized that partnership is key to achieving better returns for private investors, scaling up high-growth UK firms, and driving much-needed economic growth.
Labour’s proposed carried interest tax increase could raise £500 million, sparking industry debate.Siddiq stated, “It’s only by working together that we will deliver greater returns for private capital investors, scale up high-growth innovative UK firms, and achieve the growth our country desperately needs.”
Notably, Siddiq avoided addressing Labour’s proposal to increase taxes on carried interest from 28% to 45%.
Carried interest, the share of profits that private equity fund managers receive from successful investments, has been a point of debate.
Labour argues that it should be taxed as income, as it functions similarly to a bonus for general partners. The party estimates that this change could generate an additional £500 million for the government.
However, the private equity industry contends that carried interest serves as a crucial incentive for fund managers to seek out high-return investments, which contribute to the UK’s economic growth.
The government recently concluded a four-week consultation on the issue in August and is expected to announce its final decision on tax policy in the upcoming budget on 30 October.