The UK government has always been keen to make the UK a choice of location for establishing funds. Over the years we have seen UK tax regimes for REITS, PAIFS and TEFs be introduced with the intention of boosting the UK’s Fund sector. From 1 April 2022 the UK will have a new tax efficient vehicle known as the Qualifying Asset Holding Company (“QAHC”). Amongst meeting other criteria, QAHCs are broadly, unlisted UK tax resident investment companies that are at least 70% owned by certain investors (referred to as Category A investors), such as investment funds and various types of institutional investor.
The UK tax treatment, of such entities is clearly beneficial and only time will tell as to whether asset managers and investors will focus on the UK and move away from similar structures in other jurisdictions.
In their manuals, HMRC say:
“The QAHC regime is designed to recognise circumstances where intermediate holding companies are used between investors and their investments with the purpose of facilitating the flow of capital, income and gains between investors and underlying investments, so that, investors are taxed broadly as if they invested in the underlying assets; and the intermediate holding companies pay no more tax than is proportionate to the activities they perform”.
To meet this, QAHCs will be:
- Exempt from corporation tax on gains from disposals of certain shares and overseas land;
- Exempt from corporation tax on profits of an overseas property business where those profits are subject to tax in an overseas jurisdiction,
- Able to deduct certain interest payments that would usually be disallowed as distributions;
- Able to deduct interest payments in the QAHC on an accruals basis rather than on a paid basis;
- Free from the obligation to withhold Income Tax on interest paid to investors in the QAHC;
- Able to treat premiums on share buy backs of a QAHC from an individual, as a capital return rather than an income distribution;
- Exempt from Stamp Duty and Stamp Duty Reserve Tax on share and loan note repurchases.
In addition, for UK individuals that are on the remittance basis of taxation, certain payments to such investors can be treated as non-UK source to the extent that the distributions relate to the QAHC’s underlying foreign assets.
For anyone seeking advice regarding the QAHC please contact email@example.com