Taxes Consolidation Act 1997 section 541C

Tax treatment of certain venture fund managers

Section 541C provides a favourable tax treatment for carried interest received by managers of qualifying venture capital funds structured as partnerships.

• Carried interest — the fund manager's share of profits — is deemed to be chargeable gains where it does not exceed 20 per cent of the total profits of the qualifying venture capital fund.
• A special capital gains tax rate of 15 per cent applies to carried interest received by individuals or partnerships, and a corporation tax rate of 12.5 per cent applies to carried interest received by companies.
• The fund must invest in unquoted shares or securities of private trading companies engaged in research and development or innovation activities, held for at least three years from the date of the initial investment, with investments made on or after 1 January 2009.
• Relief is limited to the proportion of carried interest derived from relevant investments in an EEA State (including the State) or in the United Kingdom, calculated by reference to a statutory formula.