Knowledge

Background

The UK government has introduced a new UK tax efficient holding vehicle for investment funds.

The vehicle is known as a qualifying asset holding company (a "QAHC").

A QAHC is given considerable UK tax benefits.

A QAHC does not need to be a UK incorporated company. Instead, the requirement is for the relevant vehicle to be tax resident in the UK.

It is straightforward for a Jersey company to become tax resident in the UK.

A Jersey company can therefore be a QAHC and there are distinct benefits in using a Jersey company as a QAHC.

The conditions of a QAHC

In order for a company to qualify as a QAHC, certain conditions must be met. These conditions include the following:

UK tax resident

As noted above, a QAHC must be tax resident in the UK.

A Jersey company will be tax resident in the UK if it is managed and controlled in the UK.

The activity condition

The main activity of the QAHC must be the carrying on of an investment business.

The ownership condition

The sum of "relevant interests" in a QAHC which are held by persons who are not "category A investors" must not exceed 30%.

A "relevant interest" is one which confers voting power or a beneficial entitlement to distributable profits or assets on a winding up.

"Category A investors" include QAHCs; qualifying funds (including collective investment schemes); qualifying investors (including insurance businesses; sovereign wealth funds and pension schemes); and certain public authorities.

The UK tax benefits 

The QAHC regime provides a number of UK tax benefits. In broad terms, these include the following:

• Gains on the disposal of non-UK land are not chargeable gains.
• Gains on the disposal of shares (other than shares in companies which derive at least 75% of their value from UK real estate) are not chargeable gains.
• QAHCs are exempt from corporation tax on the profits of an overseas property business (to the extent that the profits are subject to tax in an overseas jurisdiction).
• QAHCs are exempt from withholding tax on payments of interest.
• The QAHC regime permits interest under profit participating loans or results dependent debt to be deducted from taxable profits.
• There is an exemption from stamp duty and stamp duty reserve tax on a repurchase by a QAHC of its own shares.

Attractive investment vehicle

Given these UK tax benefits, a QAHC will be an attractive vehicle for investing in shares or non-UK land.

The UK REIT will continue to be used as a UK tax efficient vehicle for investing in UK land.

Benefits of using a Jersey company as a QAHC

The benefits of using a Jersey company as a QAHC include the following:

• There is no Jersey stamp duty on the sale of Jersey shares. Therefore, if the shares issued by a Jersey QAHC are sold, no stamp duty will apply.
• Jersey company law has a flexible maintenance of capital regime. This enables share redemptions, share buy-backs and dividends to be made simply and efficiently.
• Jersey is a leading investment funds jurisdiction. Jersey has a deeply experienced talent pool which includes fund administrators, accountants and lawyers.

If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.