IFM41325 - Administrative requirements: breach of ownership condition: wind-down period

FA22/SCH2/PARAS 26, 28 and 29

Entering the wind-down period

IFM40440 provides guidance on the availability of a wind-down period when a QAHC unintentionally breaches the ownership condition.

If a QAHC decides to enter into the two-year wind-down period of grace, it must, in addition to the notification of breach under PARA 26, submit a wind-down notification (under PARA 28(1)(c)) to HMRC as soon as reasonably practicable. If a QAHC wishes to enter a wind-down period then, for ease, all requirements under PARA 26 and PARA 28(1)(c) will be met by making one wind-down notification. Further details of the wind-down notification can be found at https://www.gov.uk/guidance/make-a-qualifying-asset-holding-company-qahc-notification-to-hmrc

The company will then exit the QAHC regime on the last day of the wind-down period provided all other QAHC regime requirements are maintained during this period.

Example

The ownership condition was breached on 1 June 2030, the QAHC became aware of the breach on 3 June 2030. Soon after, the QAHC submitted notification of the breach under PARA 26 and a wind-down notification under PARA 28(1)(c) to HMRC. The two-year wind-down period begins from 3 June 2030. The date of exit is 2 June 2032 provided all other QAHC regime conditions continue to be met until that date. Guidance on the consequences of exit is at IFM40450.

Not entering the wind-down period

On the other hand, if the QAHC decides not to enter the wind-down period or does not meet the conditions to do so, then assuming it does not or cannot elect for a cure period to apply to the breach of the ownership condition, it must submit a ‘breach and exit’ notification under PARA 26 to HMRC as soon as reasonably practicable and exit the QAHC regime on the date of the breach.

Extension of wind-down period

IFM40440 explains how a QAHC can request a wind-down period of longer than the default two-years.

Wind-down period entered into, but assets have been acquired or capital has been raised

As IFM40440 explains, the wind-down period, during which the company continues to be a QAHC despite the relevant breach of the ownership condition, will be brought to an end if the QAHC purchases assets or raises capital during the wind-down period.

If the QAHC purchases assets or raises capital (as described at IFM40440), the QAHC must send a notification under PARA 28(6) to HMRC, whether or not the transactions are not reasonably necessary. If the transactions are not reasonably necessary, the company will cease to be a QAHC on the date the relevant transactions were made.

Example

A QAHC discovered a breach of the ownership condition on 3 June 2030 and submitted a wind-down notification to HMRC shortly thereafter.

During its wind-down period to 2 June 2032, on 30 June 2031, the QAHC purchased assets that were not reasonably necessary.

The company therefore exits the QAHC regime on 30 June 2031 and must submit a notification to HMRC as soon as reasonably practicable.