Qualifying asset holding companies explained

Q: What are the administrative requirements?

Entry notification. This must be made through the link on GOV.UK. The entry date cannot be earlier than the day after the notification is made, or 1 April 2022 if later. A company that does not yet meet the ownership condition can still enter if it reasonably expects to meet it within two years. Annual information return. Separate from the company tax return, this gives the investment manager's details, an estimate of the market value of ring fence assets, disposal proceeds, and payments for its own shares. It is due by the company tax return filing date, and a late return attracts a fixed penalty of £300. Breaches and exit. Under paragraph 26 a QAHC must notify HMRC if a relevant condition stops being met. When a company leaves the regime its ring fence assets are treated as disposed of at market value, and that deemed disposal falls within the gains exemption (IFM40910).

A qualifying asset holding company (QAHC) is a UK resident company, owned at least 70% by diversely held funds and certain institutional investors, that holds investments for a fund. Under Schedule 2 to the Finance Act 2022 it is exempt from corporation tax on gains on most shares and on overseas property, and on overseas rental profits taxed abroad, and it can deduct returns paid to investors on profit participating loans.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

What is a QAHC and why does the regime exist?

Private equity, credit and real estate funds often hold their investments through one or more intermediate companies. Before the regime these were rarely based in the UK, because a UK company could be taxed on gains and income that would be taxed again when passed to investors. Finance Act 2022 introduced the QAHC regime after consultations in 2020 (IFM40120). Its stated aim is to recognise companies that sit between investors and investments to move capital, income and gains between them.

A QAHC is not exempt from corporation tax as such. It remains taxable on the income it receives, but certain rules are modified so that it pays no more tax than is proportionate to the activities it performs, and the transfer pricing rules are extended so its taxable profit cannot fall below an arm’s length amount. Investors are then taxed on what they receive as if they had invested in the underlying assets directly. HMRC states that the regime is not intended to affect the taxation of trading profits, UK real estate or intangibles (IFM40120).

Which companies can qualify?

A company can only elect into the regime if, under paragraph 2 of Schedule 2 FA 2022, it (IFM40205):

is resident in the UK for tax purposes;
meets the ownership condition, the activity condition and the investment strategy condition;
is neither a securitisation company nor a UK REIT;
has no equity securities listed or traded on a recognised stock exchange or other public market; and
makes an entry notification to HMRC.

The ownership condition

Paragraph 3 requires that the relevant interests held by persons who are not category A investors do not exceed 30%. Interests are measured by voting rights, entitlement to profits and entitlement to assets on a winding up, much as for group relief, and each non category A investor is counted at its highest percentage under any test (IFM40210). Where securities give enhanced rights to a particular class of profits or assets, the test is applied to that class too, which stops a minority investor from holding a side pocket of assets (IFM40215).

There are five types of category A investor: other QAHCs, qualifying funds, relevant qualifying investors, certain intermediate companies and specified public authorities (IFM40240). A qualifying fund must be a collective investment scheme or alternative investment fund that is not close, is at least 70% controlled by category A investors, or meets a genuine diversity of ownership condition. Relevant qualifying investors include authorised life insurers, sovereign immune entities, UK REITs and overseas equivalents, pension schemes other than investment regulated pension schemes, and charities, with carve outs for charities funded or controlled by the managers of the company (paragraph 10).

The activity and investment strategy conditions

The company’s main activity must be carrying on an investment business, and any other activity must be ancillary to it and not carried on to a substantial extent (IFM40255). Providing management services to investee companies can be acceptable. A property company building partly for long term rental and partly for sale would fail, because development for sale is a trade. Separately, the company must not pursue a strategy of acquiring listed shares or interests deriving their value from them (IFM40265), so a QAHC cannot be used to roll up dividends from listed shares and pay them out as capital.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

What tax exemptions does a QAHC get?

Gains on shares. Gains on qualifying shares are exempt (IFM40930). Qualifying shares are any shares other than shares in UK property rich companies, meaning companies at least 75% of whose value derives from UK real estate. Unlike the substantial shareholding exemption, there is no minimum holding or holding period.
Gains on overseas property. Gains on real estate outside the UK are exempt, even where the rent from it is not taxed abroad (IFM40920).
Overseas rental profits. Profits of an overseas property business are exempt where they are chargeable to tax in the foreign country, and the related loan relationship and derivative profits are exempt with them (IFM40810, IFM40130). Compare the position of an ordinary company in our guide to corporation tax on overseas property owned by a UK company.
Deductible investor returns. Interest on profit participating loans and similar securities would normally be treated as a distribution and not deductible. Paragraph 44 switches that treatment off for securities held for the ring fence business, so returns can flow to investors without tax in the QAHC (IFM40720).
Payments to investors. No income tax needs to be withheld on interest paid by a QAHC (section 888DA ITA 2007, IFM40780); the late paid interest and deeply discounted securities rules are switched off so that, in certain situations, relief is on an accruals basis; and premiums paid when a QAHC buys back shares from individuals can be treated as capital rather than income, except in certain cases involving employment related securities (IFM40130).
Stamp duty. Repurchases by a QAHC of its own shares and loan capital are exempt from stamp duty and SDRT if the conditions are met, with the exemption self certified on the SH03 return (IFM41130).

The exemption is compulsory, so a QAHC cannot choose to tax a gain, and losses on exempt assets are not allowable (IFM40910).

What stays taxable?

The exemptions apply to the QAHC ring fence business: investment in overseas property whose income is exempt, qualifying shares, most creditor relationships, and related derivatives (IFM40350). Everything else, such as a UK property business, any trading, shares in UK property rich companies, or overseas rental income that is not taxed abroad, is taxed under the normal rules. The unallowable purpose rule still applies to its borrowing, although HMRC’s example 10 in CFM38190 says a QAHC funded by profit participating loans will not normally be caught merely because the UK was chosen for the regime.

What happens when a company enters the regime?

Entry starts a new accounting period. Overseas property, qualifying shares and loans held for an overseas property business are treated as sold and reacquired at market value immediately before entry, and any gain is taxed in the accounting period ending the day before (IFM40330). A company that joins within 30 days of becoming UK resident avoids this deemed disposal for assets held when it became resident.

Illustration only. A fund sets up a UK QAHC, financed by a small amount of share capital and profit participating loans from the fund. The QAHC buys 40% of a German trading company for £10 million and an office building in the Netherlands. It later sells the shares for £16 million. The £6 million gain is exempt. Net rent from the office, if taxed in the Netherlands, is also exempt in the UK. Interest the QAHC receives on a loan it makes to the German company is taxable, but the matching return it pays on the profit participating loans is deductible, leaving a small taxable margin for the work it does. Investors are taxed on their returns under their own rules.

What are the administrative requirements?

Entry notification. This must be made through the link on GOV.UK. The entry date cannot be earlier than the day after the notification is made, or 1 April 2022 if later. A company that does not yet meet the ownership condition can still enter if it reasonably expects to meet it within two years.
Annual information return. Separate from the company tax return, this gives the investment manager’s details, an estimate of the market value of ring fence assets, disposal proceeds, and payments for its own shares. It is due by the company tax return filing date, and a late return attracts a fixed penalty of £300.
Breaches and exit. Under paragraph 26 a QAHC must notify HMRC if a relevant condition stops being met. When a company leaves the regime its ring fence assets are treated as disposed of at market value, and that deemed disposal falls within the gains exemption (IFM40910).

What mistakes come up most often?

Testing the ownership condition only on shares and missing debt with equity like features, which counts as a relevant interest.
Assuming every shareholding qualifies. Shares in UK property rich companies are outside the exemption, and a company’s status can change as its assets change.
Letting a trading activity grow beyond what is ancillary.
Assuming overseas rent is exempt where the foreign country does not actually tax it.
Filing the entry notification late, so the intended entry date is not available.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.