IFM40130 - Overview: A short guide

Taxation of qualifying asset holding companies (QAHCs) is based on existing tax rules, but with some modifications.

These modifications include:

  • exempting gains on disposals of certain shares and overseas property by QAHCs.
  • exempting profits of an overseas property business of a QAHC, where those profits are subject to tax in an overseas jurisdiction, and also exempting the associated profits that arise from loan relationships and derivative contracts.
  • allowing deductions for certain interest payments that would usually be disallowed as distributions (along with necessary consequential changes to the hybrids rules).
  • switching off the late paid interest rules so that, in certain situations, interest payments are relieved in the QAHC on the accruals basis rather than the paid basis.
  • switching off the deeply discounted securities rules for corporates so that, in certain situations, the discount arising on any such security issued by the QAHC is relieved on the accruals basis rather than the paid basis.
  • disapplying the obligation to deduct a sum representing Income Tax at the basic rate on payments of interest.
  • switching off the transfer pricing exemption for small and medium-sized enterprises and adjusting the participation condition to ensure the transfer pricing rules apply appropriately in relation to a QAHC.
  • allowing premiums paid, when a QAHC repurchases its share capital from an individual, to be treated as capital rather than income distributions (other than in certain cases where the shares are employment-related securities).
  • allowing certain amounts paid to qualifying remittance basis users by a QAHC to be treated as non-UK source, reflecting the underlying mix of UK and overseas income and gains.
  • exempting repurchases by a QAHC of share and loan capital which it previously issued from Stamp Duty and Stamp Duty Reserve Tax (SDRT).
  • entry and exit provisions, including the rebasing of certain assets and the creation of a new accounting period when a company enters and exits the regime.

The regime also includes administrative provisions and provisions to guard against potential for abuse or avoidance.