QAHC Regime
Tax benefits
What are the tax advantages of QAHCs?*:
*Aztec Group isn’t a tax advisor, so we recommend that you engage with a qualified tax professional to understand your specific tax requirements and the advantages based on your own structures.
Leverage QAHCs for tax-efficient flexible investment management.
1. Exemption from tax on profits
QAHCs are exempt from tax on profits of an overseas property business to the extent that those profits are chargeable to foreign tax on income which corresponds to income tax or corporation tax.
2. Exemption from withholding tax
Payments of interest by a QAHC on securities held by its investors will not be subject to withholding tax.
3. Subject to transfer pricing
Deductions for interest payments that would usually be disallowed on the basis that they are paid under profit participating loans and results-dependent debt are permitted.
The late paid interest rules will not apply in certain situations, resulting in interest payments being relieved for a QAHC when accrued rather than paid. QAHCs will also be deemed to be ‘close companies’ for the purpose of the loans to participators rules.
4. Premiums paid
By a QAHC when it repurchases its share capital from an investor will be treated as a capital rather than income distribution if the premium derives from the capital gain realised on underlying investments. Note that this will not apply to shares held by a person where the right or opportunity to acquire the shares arose by reason of their employment.
5. Exemption from stamp duty and Stamp Duty Reserve Tax
For repurchases by a QAHC of its share and loan capital. There will not, however, be a stamp duty or Stamp Duty Reserve Tax (SDRT) exemption for transfers of shares in a QAHC.
6. Remittance basis for non-UK domiciled investment managers
For those who have (i) invested in the QAHC; (ii) provided investment management services to the QAHC; and (iii) subject to the remittance basis of taxation, will benefit from rules ensuring that the remittance basis will apply to any income and gains arising from foreign assets held through the QAHC. Note that, absent these rules, holding assets via a QAHC would convert offshore income and gains (which would otherwise be taxed on the remittance basis) into UK income and gains taxed on an arising basis.
7. Bifurcation of qualifying and non-qualifying business
A company can undertake both QAHC qualifying and non-QAHC qualifying business. The effect of this bifurcation is that a QAHC can be split into two theoretical sub-entities, one part qualifying as a QAHC and the other part not. One notable impact of this is that losses arising from non-qualifying activities are not permitted to be set off against profits of qualifying activities and vice versa. Assuming there are multiple QAHCs within a consolidated accounting group, the impact from a group relief perspective is that two sub-groups are deemed to exist, one qualifying and the other not, with group relief only available within the qualifying group and non-qualifying ‘groups’ respectively and the sharing of losses as between the qualifying and non-qualifying parts of the group prohibited.
8. Deemed disposal and reacquisition on entry
On entering into the QAHC regime, a company will be deemed to have made a disposal and reacquisition at market value of investments held by it in overseas land, loan relationships and derivative contracts relating to overseas property business and shares. Although tax charges will not be deferred, group relief or the substantial shareholding exemption could apply to deemed share disposals. Even if the 12-month holding requirement under the substantial shareholding exemption is not met at the time of the deemed disposal, the disposal could still benefit from the exemption provided that the QAHC continues to hold the shares after it enters into the regime.
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