UK Autumn Budget moves forward on QHAC and against on tax avoidance
UK Chancellor Rishi Sunak delivered the Autumn Budget, on 27 October, which scheduled the introduction of a proposed new Qualifying Asset Holding Companies regime. He also announced a consultation on corporate re-domiciliation, as well as further measures to tackle promoters of tax avoidance.
As part of the government’s wider review of the UK funds regime to boost the UK’s competitiveness as a location for asset management, the government is to legislate to introduce a bespoke tax regime for qualifying asset holding companies (QAHC). The Budget confirmed that this regime is intended to be legislated in Finance Bill 2021-22.
The policy paper sets out further benefits that a QAHC will enjoy in addition to those included in the policy paper published in July. Additional benefits include exempting the associated profits that arise from loan relationships and derivative contracts and allowing certain amounts paid to certain ‘non-domiciled’ residents by a QAHC to be treated as non-UK source when such individuals claim the remittance basis for the purposes of UK income tax and capital gains tax.
The government is still considering its response to the second-stage consultation and announced that it is to consult on options to simplify the VAT treatment of fund management fees.
The government is to seek views on the introduction of a UK re-domiciliation regime, which would make it possible for companies to re-domicile and therefore easier to relocate to the UK. In particular, the consultation will seek views on:
- The advantages of enabling companies to re-domicile
- The level of demand that exists, among which types of companies and sectors
- The appropriate checks and entry criteria
- The merits of establishing an outward re-domiciliation regime
- Any tax implications associated with the introduction of a re-domiciliation regime
The Autumn Budget included details of new anti-tax avoidance measures for inclusion in Finance Bill 2021-22, which include:
- Penalties on UK entities that facilitate tax avoidance provided by offshore promoters. The policy paper describes such UK entities as “willing associates and collaborators” and proposes that, in addition to existing statutory penalties, it will introduce an additional penalty of an amount up to the total fees derived from the facilitation.
- Winding up companies that are “operating against the public interest” in promoting tax avoidance, regardless of whether a tax debt exists under the relevant insolvency legislation.
- Empowering HMRC to seek a “freezing order” against promoters’ assets when it is about to initiate proceedings for a tribunal-assessed penalty under current anti-avoidance legislation, irrespective of whether an enforceable debt existed at the point that the freezing order is sought.