The government has today published details of a new tax privileged regime for asset holding companies (AHCs) to come into effect from next April (2022). The introduction of a new regime has been expected, as the government has consulted widely with industry as to how to create a vehicle that will allow the UK to compete with rival jurisdictions (most notably Luxembourg) as an AHC location, but we now have a good idea of what it will look like.
Promisingly, the reliefs available for qualifying AHCs look fairly generous (for example, a very simple and wide-ranging exemption from capital gains on most shares and overseas land) and investors will welcome any change to the rules that allow returns to be more easily extracted in capital form. However, there is some complexity around the eligibility criteria which may need to be refined and, at this stage, there are a variety of important points that the government is still considering. Therefore, we will be reviewing the proposals in detail, to assess the extent to which they achieve the aims intended by government and the goals of the asset management industry (which are not necessarily the same), and looking to provide feedback to the government as to where improvements can be made.
We will be hosting training events on the new rules in due course: in particular, we will be asking "if you had a blank piece of paper to start structuring – where might an AHC prove useful?" We'll be using these events to talk about credit strategies, private equity holding companies and separate managed accounts among other things. You can register in advance for these with us and we will send you details as soon as the dates are finalised.
The AHC proposals form part of a wider review of the UK funds regime that the government is currently conducting. As part of that wider review a comprehensive review of the REIT regime is being undertaken. However, in advance of that review being completed, the government has today announced a batch of changes to the REIT regime that are to have effect from next April. Reforms include the introduction of an ability to have unlisted REITs in cases where one or more institutional investors hold at least 99% of its ordinary share capital and some limited relaxations of the "balance of business" test. We will be working through the wider practical implications on the interaction of the UK REIT and AHC proposals and shall follow up separately with further thoughts on this and, of course, also on their combination with new Professional Investor Fund once we have more details.
The AHC proposals form part of a wider review of the UK funds regime that the government is currently conducting. As part of that wider review a comprehensive review of the REIT regime is being undertaken. However, in advance of that review being completed, the government has today announced a batch of changes to the REIT regime that are to have effect from next April. Reforms include the introduction of an ability to have unlisted REITs in cases where one or more institutional investors hold at least 99% of its ordinary share capital and some limited relaxations of the "balance of business" test. Read more on the amendments to the REIT regime.
A further aspect of the UK funds review is a review of the VAT treatment of fund management fees that was announced last March. However, in contrast to the AHC and REIT regime proposals, this seems to be in the slow lane, with nothing published to date.
Read the policy paper on Taxation of asset holding companies in alternative fund structures.
Read the policy paper on Real Estate Investment Trusts: amendments.
Register your interest in joining our webinar on asset holding companies: