Further updates to potential UK taxation of Carried Interest – Co-investment and non-UK residents

On 5 June, the Government issued an update regarding its proposed reforms around Carried Interest.

As a firm, we were pleased to see that the potential requirement around mandatory Co-investment has been scrapped.  Our article earlier this year Co-investment requirements in the proposed new PE/VC tax regime highlighted the potential consequences – particularly for younger people and newer firms – and we are pleased that this point was specifically acknowledged in the government online response.

However, we would not expect this to indicate that co-investment will cease or even reduce going forwards.  As we included in our submission, co-investment is a requirement of the investors themselves.  What was interesting, however, was the government indicating that a 1% co-investment was seen as being the most popular/appropriate amongst respondents.

It will be interesting to see whether this tallies with the results from our 2025 Survey which is currently in early production and is still open for participation Private Equity Pay Survey.

Turning to non-resident matters, it was interesting to note that the government is looking to provide clarity around when individuals will be caught within the UK tax net – with a new double test of not being UK tax resident PLUS not having spent at least 60 workdays in the UK in the relevant tax year.

The notion of a “workday” will be a new concept in UK legislation and we await more details of how it may apply here.

If the above matters resonate and you would like to discuss how MM&K could assist you with developing your approaches in these areas – please contact Stuart James (stuart.james@mm-k.com) in the first instance.

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