This is the third article in a six-part series called 'Bridging the Atlantic: Why tax makes the UK Europe’s business gateway', which focuses on UK tax issues that affect US businesses. You should read this if you are a US investor considering setting up a private equity fund in the UK. The UK remains an extremely attractive place for private equity houses to do business. The English limited partnership is still the vehicle of choice for many private equity funds. It offers flexibility, tax efficiency and a renowned brand that is trusted by investors the world over. In the US the Obama administration has carried interest in its sights again; but most of the UK’s tax breaks for carried interest have survived recent scrutiny by press and politicians. The tax treatment of carried interest in the UK, therefore, remains very favourable. Most awards of carry can be made tax free, whilst sums received from the carry vehicle will typically be taxed at very low effective rates (usually far below the headline capital gains tax rate of 28%). Moreover, for US nationals (and other non-UK domiciliaries) it is often possible to take returns from a private equity fund - whether derived from carry or co-invest – in an entirely tax-free way.