Recently finalised as part of the UK’s Finance Act 2022, the Qualifying Asset Holding Company regime was formally introduced on 1 April of this year with the intention of making the UK competitive with commonly used European asset holding jurisdictions such as Luxembourg and Ireland.
The new regime represents a key shift in the UK’s tax strategy for asset management and is a clear sign that the UK intends to present an attractive alternative to popular EU jurisdictions post-Brexit.
In this article, we will provide a brief overview of the new regime before analysing its key uses and benefits.
What is the QAHC regime?
The Qualifying Asset Holding Company (QAHC) regime was designed to make it easier for institutional investors and funds to use UK companies in asset-holding structures across a range of private market investment strategies.
At its core, the new regime is designed to create a beneficial and low-friction tax regime for eligible companies. The scheme will allow investment funds to house their ‘under the fund’ investment holding structures in the UK under a dedicated tax regime for QAHCs.
The QAHC regime incorporates existing elements of other holding company regimes that make jurisdictions like Luxembourg and Ireland attractive. As well as applying many of these elements to the UK, the regime additionally offers:
- Simplicity: The core advantage of the UK’s QAHC regime is that it can be operated wholly from within the UK, making it less expensive and operationally easier to establish necessary substance, as well as more straightforward to apply for
- Generous tax exemptions: The regime includes a broad exemption from tax on gains from shares (with some caveats) and non-UK land. There will be a complete exemption for foreign property business income as well as tax benefits for investors, making it easier for them to access returns as capital
What are the benefits?
Historically, the UK has not been an attractive jurisdiction for asset holding companies due to its tax rules. However, the jurisdiction is looking to actively entice these companies with the launch of this dedicated tax regime.
And the timing is good, with EU proposals surrounding shell entities (known as ATAD 3) prompting investors and asset managers to reassess the long-term viability of their existing structures. Using a UK structure will align with people and operations in many cases, making the structure less open to challenge under double taxation treaties.
The relatively strict eligibility criteria should also boost the reputation of the QAHC regime abroad, making it more sustainable and, again, potentially less open to challenge.
Key benefits of the new regime include:
- Suitable for private equity, venture capital, credit and real estate investments
- Provides tax neutrality for qualifying firms
- Offers access to tax treaties
- Provides a wide capital gains and dividends exemption
- Allows capital gains repatriation to UK investors
- Does not impose withholding tax on distributions and interest
- Inexpensive and easy to set up, with low operational costs
- Enables UK QAHCs to avoid ATAD 3 substance requirements
- Encourages UK-based fund managers to utilise their existing operational substance
Get in touch
With 500+ employees in the UK focused on fund and corporate services, IQ-EQ has the experience to provide a full suite of support for clients looking to use the QAHC regime for their holding structures.
IQ-EQ provides incorporation, domiciliation, directorships and company secretarial services under the QAHC regime. Once your structure is up and running, experienced professionals manage corporate compliance and governance, as well as all aspects of QAHC administration, accounting and reporting. At the conclusion of the entity, we will work with your legal and tax advisors to ensure an efficient winding down process, reporting to HMRC and transaction management.
Contact us today to learn how we can put our expertise to work for you.