PE79200 - Guidance for specific trade sectors: Private equity and venture capital: Structure of a PEH- The BVCA model

The most common structure of a PEH (set out in more detail below), often referred to as the “BVCA model”, will normally include:

• a limited partnership, where the investment funds are sourced from the individual limited partners;
• the creation of a VAT Group comprised of:
  • the investment management company (IMC) which holds the Fund;
  • the general partner (GP) of the limited partnership (LP), who will normally contract with the IMC to manage the Fund

In addition, some PEH structures will also include BidCo, a special purpose vehicle (SPV) whose purpose is to acquire the shares of the investee company. BidCo is not usually a member of the PEH VAT Group.

See vatreg09300 and vatreg09350 for guidance on LPs and how they are treated for VAT purposes. See vgroups02000 for guidance on VAT Grouping.

The LP’s commitment/ fund investment is by way of an interest free loan, with amounts drawn down to fund investments in targeted projects identified as and when necessary.

The GP is entitled to retain a share of the funds per annum, paid monthly. This is described in the LP agreement as a “Priority Profit Share” (‘PPS’). HMRC accepts that this sum is not the consideration for any supply for VAT purposes.

In addition, the IMC charges the GP the equivalent of its PPS. This is consideration for a standard rated supply for the services which the MC provides to the GP but disregarded where the supply is made within the PEH VAT group (which is normally the case).