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    Dec. 11, 2025

U.K. Carried Interest Taxation: Final Reforms Set Qualifying Criteria Across Asset Classes

The U.K. government has reached a final decision on the tax treatment of carried interest, with new legislation to implement fundamental changes from April 2026. The new regime is the product of a consultation process which began with the budget issued by the U.K. government in October 2024. Industry engagement with the consultation process has successfully averted some of the more onerous aspects of the original proposals. Notably, the new regime will not require a “minimum co‑investment,” as had been initially proposed. The rules will, however, only offer beneficial tax treatment for carried interest derived from long-term investments. That change will bring complexity for the industry, and the rules will not apply to all investment strategies in the same way. In a guest article, Fried Frank partner Oliver Currall describes the U.K.’s new carried interest regime, with particular emphasis on how the calculation of relevant investment holding periods will apply across different investment strategies and affect investment funds’ ability to qualify for beneficial U.K. tax treatment. The article also identifies some specific concerns the new rules present for PE sponsors, as well as for executives who live or spend time working in the U.K. For Currall’s insights on the previously proposed U.K. tax reforms, see “U.K. Carried Interest Taxation: Increased Rates and Complexity Introduce Uncertainty for PE Sponsors” (Dec. 12, 2024).

Unique Tax Considerations of Continuation Funds Compared to Other Secondaries Transactions

Engineering the purchase and sale of assets in a GP‑led secondary transaction requires a keen awareness of tax structuring issues that often bear little relationship to the issues typically negotiated in more traditional secondaries transactions. The complexity of those transactions continues to grow as they involve assets, investors and tax regimes spread throughout multiple jurisdictions. With that said, GPs of continuation funds enjoy significant flexibility to tailor bespoke structures and arrangements to optimize the tax treatment for all parties involved, particularly compared to traditional secondaries transactions. GPs leading continuation fund transactions can achieve optimal results for interested parties by using a range of vehicles and structures, as well as by thoughtfully addressing the issue in the transaction documents. This article examines the idiosyncrasies of tax structuring in the context of continuation funds, including the negotiating dynamics of GPs, rollover investors and new investors; key terms and issues to address in transaction documents; the additional tax flexibility they afford investors; and the complications introduced by related M&A transactions. See “Continuation Vehicles Survey Highlights Increasing Convergence of Some Terms, Vicissitudes Among Others” (May 29, 2025).

Economic and Operational Terms of PE Spinouts and Subsequent Challenges (Part Three of Three)

For an investment team to successfully spin out from an established PE firm, it is important for the parties to retain a symbiotic, ongoing relationship. The seed capital and early infrastructure offered by a legacy firm can allow a spinout entity to thrive, with benefits inuring to the prior firm through the negotiated revenue sharing agreement. If that relationship is handled clumsily, however, or the spinout principal is ill-prepared for the rigors of operating the new entity, then a once-promising spinout can end in disaster. This third article in a three-part series details some of the economic and operational terms negotiated as part of the ongoing relationship between the two entities, as well as certain post-spinout complications that arise. The first article explained what PE spinouts are, why parties pursue spinouts and what factors impact the timeline for a spinout. The second article explored some obstacles that legacy firms and principals need to navigate to complete a spinout, including as to track record portability and non-solicitation clauses. See our two-part series on seeding arrangements: “How a Manager Can Optimize Its Infrastructure to Attract a Seeder” (Sep. 22, 2020); and “Finding the Right Seeder/Manager Rapport and Tips for Luring Other Prospective LPs” (Sep. 29, 2020).

Pervasive Flaws in PE Sponsors’ Cybersecurity Oversight of Portfolio Companies

As they navigate a fast-developing threat landscape, PE sponsors need to be strategic and consistent in how they oversee cybersecurity at their funds’ portfolio companies. Sponsors need to gain insight into the risks posed by a potential cybersecurity attack on those companies, and be equipped to address any gaps in security programs – either as to a specific company or across their entire portfolio. In an ACA Aponix program, managing director Greg Slayton, senior principal consultant Isaac Niedrauer and director Matt Grist summarized data collected through ACA’s analytical tools, and drew conclusions about PE sponsors’ cybersecurity budgets, staffing, practices and priorities. This article distills their insights. See “A Checklist to Help Fund Managers Assess Their Cybersecurity Programs” (Oct. 11, 2022).

FinCEN Proposes Pushing Back AML Rules Compliance Date to January 2028

On September 22, 2025, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury (Treasury) hit pause on its aggressive advancement of anti-money laundering (AML) and countering the financing of terrorism efforts with the publication of a Notice of Proposed Rulemaking (NPRM), which seeks to push back the compliance date for the AML Rules (Rules) for investment advisers by two years, from January 1, 2026, to January 1, 2028. FinCEN’s rationale for the postponement is that the investment adviser sector has grown so dramatically, and the costs of the compliance programs envisioned under the Rules are so high, that more time is needed to reassess the Rules and consider changes to them. But the NPRM has fueled controversy, driving three lawmakers to send a letter (Letter) to Secretary of the Treasury Scott Bessent expressing alarm over a delay to the implementation of policies designed to protect investment advisers and the U.S. financial system. This article summarizes the NPRM and the Letter, explores the NPRM’s impact on the proposed customer identification program requirements and presents practical takeaways, with commentary from legal experts. See our two-part series on the Rules: “Parsing FinCEN’s Final AML Rules for Investment Advisers” (Jan. 23, 2025); and “Understanding the Implications for Fund Managers” (Feb. 6, 2025).

Simpson Thacher Welcomes Private Funds Partners in London and Hong Kong

Simpson Thacher has welcomed two new partners – Samuel T. Brooks joined the firm’s private funds practice in London, and Michelle Cheh joined the private funds and funds transactions group in Hong Kong. For insights from Simpson Thacher, see our two-part series on retail distribution platforms: “Growing Popularity, Numerous Benefits and Operational Obstacles” (Sep. 4, 2025); and “Selection Criteria, Due Diligence Processes and Potential Pitfalls” (Sep. 18, 2025).

PELR Will Resume Regular Publication in January

The Private Equity Law Report will not publish during the upcoming holiday period and will resume its normal biweekly publication schedule during the week starting January 5, 2026. Have a safe and happy holiday season.

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