QAHC Regime
Key steps
Electing into the QAHC regime
A company that wishes to be classified as a QAHC must submit a notification to HM Revenue & Customs (HMRC).
A company that is established whilst a fund remains in capital raising mode may struggle to satisfy the ownership condition, but a special rule allows a company to be classified as a QAHC if it meets all of the other conditions and declares that there is a reasonable expectation that the ownership condition will be met within two years.
Ongoing monitoring
A QAHC is required to take reasonable steps to monitor its ongoing compliance with the ownership condition and to notify HMRC if it ceases to satisfy any of the conditions to becoming a QAHC, or if it intends to voluntarily exit the QAHC regime.
Substance requirements
A QAHC will need to ensure that it has substance in the UK. Tax and structuring advisors will provide specific details, such as UK tax resident directors, meetings and decisions made in the UK, as well as a robust governance structure regarding board meetings and records of such decisions.
Exiting the QAHC regime
The legislation also provides for a two-year wind-down period in certain circumstances for a company which intended to cease its QAHC qualifying business at the time a breach of the ownership condition occurred. The effect of this is that the company will cease to be a QAHC at the end of the two-year period, rather than immediately following the breach.
Breaching QAHC conditions
A company will cease to be a QAHC immediately after breaching any of the QAHC conditions (save in respect of the ownership condition and the activity condition, discussed in more detail below) or on the date specified by it in an exit notification.
“Non-deliberate” breaches of the activity restriction will not be treated as a breach of the QAHC conditions, subject to the QAHC notifying HMRC and to the QAHC satisfying the condition again as soon as reasonably practicable.
“Non-deliberate” breaches of the ownership condition will also not be treated as a breach of the conditions, subject to: A: no more than 50% of the relevant interests in the QAHC being owned by non-category A investors;
B. the QAHC notifying HMRC;
C. the QAHC taking reasonable steps to monitor compliance with the ownership condition; and
D. the ownership condition being satisfied again within 90 days of the day on which the QAHC became aware of the breach.
Breaches will be considered “deliberate” if they occurred as a result of the action of a specific person (including the QAHC, its directors and/ or its managers) if that person knew that a consequence of the action in question would be a breach of the relevant condition and that person could reasonably have avoided taking the action in question.
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