Private equity industry warning over UK tax breaks

The private equity industry warned today it could quit Britain if the Government clamps down on controversial tax breaks enjoyed by the sector.

The industry’s trade body told the Treasury that private equity firms could leave the UK for countries such France, Italy or Germany if the tax rate is upped significantly.

The British Private Equity and Venture Capital Association (BVCA) said the UK enjoyed only a “fragile” lead over other countries in a submission to the Treasury ahead of its Pre-Budget Report, due later this year.

Private equity firms can pay as little as 10% under current UK tax rules, which has led to accusations that the sector is taking advantage of an over-generous tax regime at the expense of jobs and staff in the firms that they buy out.

The industry’s tax regime is now the subject of a Treasury Select Committee inquiry, launched in June to scrutinise private equity regulation and tax relief.

The committee is expected to produce a hard-hitting report when it releases details of its findings and speculation has suggested the Government may seek to use its forthcoming Pre-Budget Report to raise the private equity tax rate.

But the BVCA said: “Any substantial change in UK tax rates would make the UK significantly less attractive than other countries and risks significant movement of the private equity industry offshore.

“In view of the higher actual rates paid by the industry such a move clearly would not benefit the UK.”