What are the advantages of the UK’s new Qualifying Asset Holding Company (QAHC) regime?

There are significant benefits for investors and fund managers when structuring entities in the UK via the newly introduced QAHC regime, say Phil Sabatino, Commercial Director, UK, and Daniël Vijselaar, Head of Business Development, Western Europe

The UK’s newly launched Qualifying Asset Holding Company (QAHC) regime offers significant benefits to investors setting up an entity.

The QAHC’s structural simplicity should prove advantageous to institutional investors, asset managers, fund managers, pension funds and sovereign wealth funds.

This is making the UK an attractive alternative for investment structures which, historically, were mainly set up through other jurisdictions. In fact, we at Intertrust Group have already seen an increase in requests to domicile investment structures in the UK.

The regime could also provide an option for investors who may be affected by the European Union’s Anti-Tax Avoidance Directive (ATAD 3), when this comes into force. The directive proposes introducing a comprehensive framework to identify shell companies, with the aim of impacting entities that don’t perform any actual economic activities.

What are the benefits of a QAHC?

The QAHC arose from the UK’s 2020 Budget Review and aims to make the UK an attractive base for the funds industry after leaving the EU.

The main benefits are:

• Complete exemption from tax on any capital gains from companies that qualify for the regime
• Abolition of interest withholding tax within these companies
• No stamp duty on share buybacks within the entity

Another key benefit is simplicity of structure.

As a result, investors can maintain existing relationships with their UK service providers while enjoying equivalent tax benefits to established fund jurisdictions.

Investors may review their EU entities in light of ATAD 3

The ATAD 3 directive aims to prevent the misuse of shell entities for tax purposes. It comes into force on 1 January 2024 and could affect holding companies resident in the EU that enjoy double tax treaty benefits but have limited economic substance.

The new rules could affect M&A transactions that took place from 1 January 2022, so many investors are now considering the suitability of their existing structures in the EU.

Who might benefit from the new QAHC regime?

Asset holding companies such as real estate companies, private equity and corporate multinationals could benefit from setting up a new QAHC entity.

Take-up is likely to come from institutional investors, UK public authority funds, overseas pension schemes, insurance companies and sovereign wealth funds.

To qualify for the regime, the entity must meet the following key criteria:

• Be a UK-domiciled resident company (importantly, it can be resident but does not have to be UK incorporated)
• Be owned by at least 70% of acceptable investors or qualified investors
• Acceptable investors are defined as a qualifying fund, an intermediate holding company, another QAHC company or an institutional investor
• Not be a UK real estate investment trust (REIT)
• None of the equities or securities held by the company can be listed or traded on any stock exchange or public market

Most QAHCs are likely to be new structures but it is possible to apply and convert an existing entity.

What are the next steps to setting up a QAHC?

The process for investors who plan to set up a QAHC is simple – first obtain advice from tax advisers and ensure your structure meets the eligibility criteria. Then apply to the UK’s tax and customs authority to register the QAHC status of your holding company.

How can Intertrust Group help?

Intertrust Group can help you set up QAHC entities. We are market leaders in incorporating and administering entities.

We can manage the entire lifecycle of an entity, from incorporation up to dissolution of the entity. Many of our clients benefit from our suite of services including providing directorships, domiciliation, company secretarial services, accounting services, bookkeeping and quarterly and monthly reporting. We can also provide supplementary corporate services that are needed for those entities on an ongoing basis such as bank account management and VAT filings.

Why Intertrust Group?

• Intertrust Group is a publicly listed company with 70 years’ experience in providing world-class trust and corporate services to clients around the world.

• Intertrust Group provides a wide range of financial and administrative services to clients operating and investing in the international business environment. We help companies to expand globally, offering support with restructuring, outsourcing and further developments.

Visit our website and get in touch for more information and talk to our expert team today