Qualifying Asset Holding Company (QHAC)


The ‘qualifying asset holding companies’ (QAHCs) rules were brought into force on 1 April 2022 to introduce an alternative UK regime for holding companies, with beneficial tax treatment for qualifying entities and their investors. It was intended to enhance the UK’s competitiveness as a location for asset management and for investment funds.

The regime is designed for asset holding companies (AHCs) that meet certain criteria and are used in a range of collective and institutional investment structures to hold investment assets, and the investment funds, institutions, individuals and other entities that invest in those structures.

The aim is to recognise circumstances where intermediate holding companies are used to facilitate the flow of capital, income and gains between investors and underlying investments, so that investors are taxed broadly as if they invested in the underlying assets and the intermediate holding companies pay no more tax than is proportionate to the activities they perform.

The regime for QAHCs includes:

  • Exempting gains on disposals of certain shares and overseas property by QAHCs
  • Exempting profits of an overseas property business of a QAHC, where those profits are subject to tax in an overseas jurisdiction, and exempting the associated profits that arise from loan relationships and derivative contracts
  • Allowing deductions for certain interest payments that would usually be disallowed as distributions (along with necessary consequential changes to the hybrids rules)
  • Switching off the late paid interest rules so that, in certain situations, interest payments are relieved in the QAHC on the accrual’s basis rather than the paid basis
  • Switching off the deeply discounted securities rules for corporates so that, in certain situations, the discount arising on any such security issued by the QAHC is relieved on the accrual’s basis rather than the paid basis
  • Disapplying the obligation to deduct a sum representing income tax at the basic rate on payments of interest
  • Switching off the transfer pricing exemption for small and medium-sized enterprises and adjusting the participation condition to ensure the transfer pricing rules apply appropriately in relation to a QAHC
  • Allowing premiums paid, when a QAHC repurchases its share capital from an individual, to be treated as capital rather than income distributions
  • Allowing certain amounts paid to qualifying remittance basis users by a QAHC to be treated as non-UK source, reflecting the underlying mix of UK and overseas income and gains
  • Exempting repurchases by a QAHC of share and loan capital which it previously issued from Stamp Duty and Stamp Duty Reserve Tax (SDRT)
  • 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.

A QAHC must be at least 70% owned by diversely owned funds, or certain institutional investors, and must mainly carry out investment activity with no more than insubstantial ancillary trading. The company’s investment strategy must not involve the acquisition of listed equity securities, outside of a public-to-private transaction, and the UK AHC must not be a UK REIT or listed or traded on a recognised stock exchange or similar.

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