Section 23Q | Carried interest: avoidance of double taxation

(1)Subsection (2) applies where—

(a)an individual performs investment management services directly or indirectly in respect of an investment scheme under arrangements mentioned in section 23I(1)(a), and

(b)the individual is entitled to carried interest under the arrangements.

(2)No income tax is chargeable on the individual by virtue of the individual’s entitlement to carried interest other than—

(a)income tax chargeable in respect of carried interest arising to the individual under the arrangements—

(i)by virtue of section 23I or 23M,

(ii)by virtue of section 62 (earnings) or Part 7 of ITEPA 2003 (employment income relating to securities), or

(iii)where an election made under section 23J has effect for a tax year, otherwise under this Part, or

(b)income tax chargeable in respect of—

(i)the award of the entitlement to carried interest to the individual, or

(ii)the individual’s acquisition of the entitlement to carried interest,

whether by virtue of section 62 (earnings) or Part 7 of ITEPA 2003 (employment income relating to securities) or otherwise.

(3)Subsection (4) applies where—

(a)an individual is chargeable to income tax and national insurance contributions by virtue of section 23I or 23M in respect of a sum of carried interest arising to the individual from an investment scheme, and

(b)at any time any other UK tax or national insurance contributions charged on any person—

(i)in relation to the sum mentioned in paragraph (a), or

(ii)or in respect of any person’s entitlement to that sum,

has or have been paid and not repaid.

(4)The individual may make a claim for one or more consequential adjustments to be made in respect of the profits chargeable by virtue of section 23I or 23M to take account of the amounts paid as mentioned in subsection (3)(b).

(5)On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(6)Consequential adjustments in respect of the profits chargeable by virtue of section 23I or 23M must not have the effect that—

(a)the total of—

(i)the amount of income tax and national insurance contributions charged on the adjusted profits by virtue of section 23I or 23M, and

(ii)any amounts paid as mentioned in subsection (3)(b), is less than

(b)the amount of income tax and national insurance contributions to which the individual was chargeable by virtue of section 23I or 23M in respect of the sum of carried interest before the making of any consequential adjustments.

(7)Consequential adjustments may be made—

(a)in respect of any period,

(b)by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

(c)despite any time limit imposed by or under an enactment.

(8)In this section “UK tax” means income tax, corporation tax, capital gains tax or inheritance tax.

(9)For the purposes of section 9(2) of TIOPA 2010 (unilateral entitlement to credit for non-UK tax corresponding to capital gains tax), in a case where the capital gain mentioned in subsection (2)(b) of that section accrued on a sum of carried interest arising to an individual, the reference to capital gains tax calculated by reference to that gain is to be read as if it were a reference to income tax chargeable under section 23I in respect of the sum of carried interest.