Private Equity Star Takes Trip to Wonderland to Win Tax CaseKit Chellel
A private equity executive won his five-year legal battle with U.K. authorities to stop his fees from managing venture capital funds being taxed twice.
George Anson, who has worked at Boston-based HarbourVest Partners for 25 years, faced a 67 pence levy on every pound earned from a Delaware company between 1997 and 2004 after Her Majesty’s Revenue and Customs tried to charge income that had already been taxed in the U.S.
The U.K. Supreme Court found that Anson qualified for relief from double taxation. The ruling didn’t say how much he might have saved in taxes.
The court’s decision is “entirely sensible,” said Robert Waterson, a lawyer at RPC who isn’t involved in the case. “Taxation of the same profits twice is clearly something the double taxation conventions are designed to mitigate.”
Top private equity managers, who can earn hundreds of millions of dollars a year, normally get a share of the profits made by the funds they manage, known as carried interest. President Barack Obama, in his proposed budget for the 2016 fiscal year, said he wants to change the favorable tax treatment for buyout specialists so carried interest is treated as ordinary income rather than a capital gain.
At times Anson’s lawsuit took bizarre turns. In a 2012 court hearing, his lawyers invoked a rule normally used to punish tax dodgers. They said HMRC should have considered that Anson might be trying to avoid paying tax as that would have triggered a clause giving him relief from double taxation.
Judge George Mann said at the time this argument was a “Lewis Carroll-like inversion” and said the trial had taken a “trip into Wonderland.” He ruled in favor of HMRC in 2012.
Anson argued throughout the case that his tax bill should be kept private. “The figures were and are regarded by Mr. Anson as being sensitive commercially,” his lawyer Jonathan Peacock told the Supreme Court Judges in October last year. No figures are published in the Supreme Court ruling, or in any other decision in the case.
Anson and HarbourVest spokeswoman Laura Thaxter didn’t respond to e-mails seeking comment. HMRC declined to comment.
The Delaware company, HarbourVest Partners LLC, earned fees from investment management and didn’t share in the gains or losses of the funds it managed, according to the Supreme Court ruling.
Anson was born in Canada, studied in the U.S. and moved to London in the 1980s to join the firm that later became Pantheon Ventures. He was working at John Hancock Mutual Life Insurance Co.’s venture capital unit in 1997 when its managers Brooks Zug and Edward Kane agreed to buy the division, later renamed HarbourVest. HarbourVest manages assets worth about $38 billion.
Anson is a former chairman of the European Private Equity and Venture Capital Association and sits on the advisory boards of funds managed by BC Partners and Cinven.
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