UK Spring Budget 2023: Points For Asset Managers

Introduction

On 15 March 2023, the UK government revealed the widely anticipated Spring Budget, which contained a number of measures that may be of interest to asset managers.

Carried Interest – election to be taxed on an accruals basis

US citizens realising carry while tax resident in the United Kingdom may currently face punitive rates of tax, due to double taxation caused by mismatches in the timing of income inclusions under the US and UK tax systems. In brief, private fund agreements often cause the United States to tax carry returns on a hypothetical asset liquidation basis, giving rise to taxable income before there is any corresponding cash entitlement. The UK, on the other hand, generally taxes carry on an arising basis in accordance with the cash distribution waterfall. The UK-US Tax Treaty does not provide relief in this regard, because the US is authorised to tax its citizens at all times in accordance with domestic law. In principle, a