Back in March 2020, Chancellor Rishi Sunak launched a consultation on the tax treatment of asset holding companies in fund structures as part of a wider review of the UK funds regime. Following a second consultation late last year, initial draft legislation has now been published for a new Qualifying Asset Holding Companies (QAHC) taxation regime. Further legislation is expected in due course.
The aim of the new taxation regime, which comes into effect in April 2022, is to enhance the UK's competitiveness as a location for asset management and investment funds. An intermediate investment vehicle will be created that works in a variety of different investment funds, including private equity funds, while providing sufficient simplicity and certainty to compete with other established regimes.
To qualify for the tax-advantaged regime, a QAHC must be UK-resident and:
Investors will broadly be taxed as though they had invested in the underlying assets while QAHCs will pay tax proportionate to the activities they perform.
Tax advantages of the new regime include:
The draft legislation is subject to technical consultation (closing on 14 September 2021) following which it will be included in the Finance Bill 2021-22 (and enacted as the Finance Act 2022).
To discuss the issues raised in this article in more detail, please reach out to a member of our Tax team.