01 Nov 2021

In the 2021 Autumn Budget the Government finalised its policy paper on a new tax regime for qualifying asset holding companies (QAHCs) and certain payments that QAHCs may make. A QAHC must be at least 70% owned by diversely-owned funds, or certain institutional investors, and mainly carry out investment activity with no more than insubstantial ancillary trading.

The measure forms part of a wider review of the UK funds regime to consider reforms which hold the potential to have positive outcomes for the financial sector and enhance the UK’s competitiveness as a location for asset management and for investment funds.

The aim is to recognise circumstances where intermediate holding companies are used to facilitate the flow of capital, income and gains between investors and underlying investments, so that investors are taxed broadly as if they invested in the underlying assets and the intermediate holding companies pay no more tax than is proportionate to the activities they perform.

The regime is intended to only be available to prescribed investment arrangements involving diversified investment funds, charities, long-term insurance business, sovereign immune entities and certain pension schemes and public bodies. The regime is not intended to affect the taxation of profits from trading activities, UK land or intangibles.

Legislation to establish a new tax regime for QAHCs and some of the payments they make will be introduced in the Finance Bill 2021-22. This measure will take effect from 1 April 2022.


HMT published a consultation in March 2020 exploring whether changes to the tax treatment of companies used by funds to hold assets could make the UK a more attractive location for these companies. AREF’s response to this can be found here.

In December 2020, HMT published their response and a second stage consultation. In this they summarised the responses submitted to the initial consultation and outlined the Government’s response. They believed that there was a strong case for change in this area and therefore, launched a second stage consultation on detailed design features of a new regime for asset holding companies (AHCs). The consultation also considered targeted changes to the REIT regime. AREF's response to this second consultation can be found here.

The Government published their response to the second stage consultation in July 2021. In this they set out the detail of the forthcoming regime for AHCs, as well as targeted changes to the tax regime for Real Estate Investment Trusts. Alongside the consultation response, the government published a policy paper and draft legislation.



whos who me

Chris Hewitt

Tax Advisor, AREF