On 15 December 2020, HM Treasury published a consultation on proposals for changes to the UK tax regime applicable to asset-holding companies (AHCs) in alternative fund structures.
This is actually the second consultation on this topic and is part of the Government’s stated intention to make the UK an attractive and competitive jurisdiction for investment funds.
As well as summarising responses to the first consultation, this second consultation seeks views on a number of proposals for reform of the UK tax treatment of AHCs. The Government’s preference is for a bespoke tax regime to apply to AHCs. The proposals for AHCs include:
- an exemption from tax on capital gains realised by an AHC on disposal of investment assets (save for UK land, or any “property-rich” assets)
- a possible exemption from UK withholding tax on payments of interest from an AHC to investors
- a possible stamp duty (and SDRT) exemption on a repurchase of shares by an AHC to return capital to investors, and a potential broader exemption for share / loan capital transfers
- changes to the application to AHCs of the UK’s hybrid mismatch rules and group relief regime
- eligibility criteria for the AHC regime and administrative provisions such as entry into, and exit from, any new AHC tax regime
The consultation also proposes changes to the UK real estate investment trust (REIT) regime. For example, making the REIT regime more accessible by relaxing some of the statutory tests (to include the REIT maximum shareholding rule, and “balance of business” test).
Comments are invited by 23 February 2021.
The consultation document can be viewed here.