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The QAHC Regime: Its Impact On The UK Funds Industry And How It May Benefit Your Firm

The QAHC Regime: Its Impact On The UK Funds Industry And How It May Benefit Your Firm

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Dublin / New York, November 1, 2022

The Qualifying Asset Holding Company (QAHC) regime was formally introduced on 1 April 2022 to enable the UK to position itself as an attractive option for managers seeking to set up asset holding structures and manage tax leakage. Since it came into force, Centaur has received a large number of queries from asset managers about the costs, benefits and the eligibility criteria for entrance into the regime.

QAHC Explained

Post Brexit, as the UK fights to retain every pound of investment and attract new business to the shores, appropriate structures are required across the board to assist in that fight. An example of this, the QAHC, is an unlisted UK tax resident company that is at least 70% owned by ‘good’ (Category A) investors such as investment funds and various types of institutional investors. The 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. The regime can be used for both new and existing structures through establishment or conversion with private equity, venture capital, and private credit managers being the most prevalent to show early interest in the structure.

Eligibility Criteria

Three main conditions must be met by a company in order to be a QAHC are:

  • Be UK resident.
  • Be at least 70% owned by “Category A” investors.
  • The main activity must be the carrying on of an investment business; any other activities are ancillary.

Tax Benefits 

Most importantly, QAHCs are exempt from tax on profits of any overseas property businesses. In summary QAHC’s are:

  • Exempt from tax on gains on disposals of certain shares and overseas property by QAHCs.
  • Exempt from profits of an overseas property business, where those profits are subject to tax in an overseas jurisdiction.
  • Allowed deductions for certain interest payments that would usually be disallowed as distributions (along with necessary consequential changes to the hybrids rules)
  • Allowed switch off the late paid interest rules
  • Allowed switch off the deeply discounted securities rules for corporates
  • Allowed to disapply the obligation to deduct a sum representing Income Tax at the basic rate on payments of interest.
  • Allowed to switch off the transfer pricing exemption for small and medium-sized enterprises.
  • Allowed for premiums paid, when a QAHC repurchases its share capital from an individual, to be treated as capital rather than income distributions.
  • Allowed for certain amounts paid to qualifying remittance basis users by a QAHC to be treated as non-UK source.
  • Exempt from repurchases by a QAHC of share and loan capital which it previously issued from Stamp Duty and Stamp Duty Reserve Tax (SDRT)
  • Allowed entry and exit provisions, including the rebasing of certain assets and the creation of a new accounting period when a company enters and exits the regime.

For queries about The QAHC Regime, please contact:

Peter O'Hara headshot

Peter O' Hara
Business Development
PERE Europe
Tel: +44 203 318 2737
peter.Ohara@centaurfs.com

Gareth Davies

Gareth Davies
Head of Client Services,
PERE Europe
Tel: +44 203 318 2737
gareth.davies@centaurfs.com

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