QAHC: The new UK tax-efficient vehicle for asset holding companies

31 August 2023

Investors can ring-fence certain assets to receive beneficial tax treatment.

As highlighted in our previous article from Global Head of Funds, Wim Ritz, the UK government now offers a tax-efficient vehicle for asset holding companies: the Qualifying Asset Holding Company (QAHC). This article looks at how QAHCs work, who would benefit from setting up a QAHC, the tax benefits they offer, the eligibility criteria and reporting requirements, and how ZEDRA can assist in setting up and managing a QAHC.

Introduced under the Finance Act 2022, the QAHC regime’s key aim is to enhance the UK’s competitiveness as a location for asset management and investment funds by addressing the challenges that may lead such companies to be located outside of the UK.

In essence, QAHCs allow certain investors called Category A investors (for example, pension funds, qualifying funds, and charities) to ring-fence certain assets (including qualifying shares, loans and overseas property) in order to receive beneficial tax treatment.

The tax benefits include:

  • Exemption from tax on capital gains from disposal of shares and overseas property
  • Tax exemption from foreign property business income (including rental income)
  • No withholding tax on dividend/interest payments to investors
  • No stamp duty on share buy-backs
  • Tax deductions on interest paid on debt assets/loans

Who would benefit from setting up a QAHC?

A QAHC is relatively simple to set up and manage, and ideal for certain investors. However, several qualifying criteria apply:

  • It needs to be at least 70% owned by Category A investors
  • Its main activity must be investment business
  • None of the equity securities it holds can be listed or traded on a recognised public market or exchange
  • It needs to be UK tax resident (but not necessarily UK incorporated)
  • It is not an REIT

Reporting requirements

Over the life of a QAHC, the owners will need to provide a QAHC information return to HMRC annually – in addition to the company tax return. This is an estimate of the market value of the QAHC’s ring-fenced assets at the end of each accounting period and must be submitted electronically.

HMRC will also need to be informed if aspects of the QAHC — such as its eligibility criteria — change.

How ZEDRA can help

Our Funds team can help you understand if a QAHC is the right structure for you, as well as set up and manage a QAHC for you, including the reporting requirements for HMRC. Since its launch, the regime has shown high levels of markets interest. With an average of 20 years’ experience, our UK Corporate team and alternative investment experts provide everything a QAHC structure needs to be set up and operate.

Please contact Head of Commercial – Funds, Archie Irtizaali to find out more.

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