UK Drops Plans For Tax Crackdown On Buyout Firms, Accountancies

UK tax officials have scrapped plans for a crackdown that would have impacted a wide range of private equity firms, marking a significant win for the industry under the new Labour government, Alex Wickham reported for Bloomberg News.

Members of these partnerships who contribute a certain amount of capital—known as “top-ups” in industry terms—are considered self-employed, reducing the amount of National Insurance contributions their employers must pay. I Photo: Gary Todd Flickr

HM Revenue and Customs (HMRC) announced it would no longer proceed with changes to how limited liability partnerships (LLPs) make National Insurance contributions after receiving feedback from industry representatives.

Many private equity firms, consultancies, and accounting companies operate as LLPs.

Under HMRC rules, members of these partnerships who contribute a certain amount of capital—known as “top-ups” in industry terms—are considered self-employed, reducing the amount of National Insurance contributions their employers must pay.

“Having conducted a thorough review and listened carefully to industry representatives, we’ve decided that the anti-avoidance rule does not apply where top-ups are genuine, intended to be enduring, and involve real risk,” an HMRC spokesperson stated.

In her October budget, Chancellor of the Exchequer Rachel Reeves softened a plan to increase taxes on certain income earned by buyout executives after industry lobbying.

Starting in April, private equity executives will pay a 32% tax on carried interest—their returns on asset sales—up from the current 28%. However, this remains well below the 45% top income tax rate that some had feared the Labour government would impose.