Bosses hit back over private equity crackdown

Danny Alexander told the Liberal Democrat party conference that the Government would be closing a loophole which allows private equity shareholders to siphon money from their firms without paying income tax.

He added that partners in partnership firms would no longer be able to structure their arrangements to avoid tax.

Mr Alexander told party activists he “made no apology for going after tax dodgers”.

Tim Hames, director general of the British Venture Capital and Private Equity Association, hit back.

He said: “This matter which Danny Alexander refers to is not a ‘loophole’ as reported in some quarters but a well established set of rules.

“These are straightforward commercial transactions – they are not structures designed to enable individuals to avoid tax.

“It is strange then to hear them entering the public arena in the language of newly discovered tax avoidance.

“This is party conference politics, pure and simple.”

He said that the BVCA has been in continuous dialogue with the Treasury and HMRC about the issue of loans made by private equity partnerships.

The Treasury suspects that partners in private equity firms use loans to shelter their earnings from tax.

Mr Hames added: “The Government is, of course, entitled to amend or end such arrangements as it wishes.

“What it may discover, however, is that this is not a black and white question but a far more complicated matter with implications that extend well beyond the private equity industry.

“This is about legitimate commercial logic, not ‘avoidance’.

“The BVCA therefore welcomes the period of informal consultation that has been announced and will work with ministers and officials to reach a settlement that is coherent, practical and satisfactory on all sides.”

The private equity industry has invested £60bn into more than 3,000 UK companies over the last five years to help them grow, create jobs, and return capital to pension fund investors, according to the BVCA.

It added that the tax deductibility of debt interest encourages growth and investment and lowers the cost of capital for SMEs.

Lib Dem conference: Page 4