Tax treatment of AHCs in alternative fund structures (second stage consultation) – Law Society response

The proposals

HM Treasury consulted on the detailed design features of a proposed new regime for asset holding companies (AHCs).

The consultation states that the regime will aim to deliver an appropriately targeted, proportionate and internationally competitive tax regime for AHCs that will remove barriers to the establishment of these companies in the UK.

The consultation also considers targeted changes to the real estate investment trust (REIT) regime.

Our view

Our response to the first stage consultation on AHCs made in August 2020 explained a number of the barriers to the establishment of AHCs in the UK and explored ways in which they could be addressed.

In our response to this second stage consultation, we comment on the proposed eligibility criteria for AHCs and propose possible features of a tax regime for AHCs.

In our view, in order to succeed, the AHC regime should align with existing legislative concepts, where possible, and be comparable with competitor regimes.

We emphasise the importance of aiming for operational simplicity and technical certainty in the design of the AHC regime, as well as ensuring that revenue protection measures are targeted and proportionate.

What this means for solicitors

The UK asset management industry is a significant employer in the UK and a world leader in the sector.

Many of our members are involved in advising asset managers making and managing investments in alternative assets on tax and other issues.

As such, many of our members are frequently called upon to advise on the issues covered by this consultation and have an interest in a well-functioning UK funds regime.

Next steps

The consultation closed on 23 February.

HM Treasury will analyse the feedback.

When the consultation was launched, it was stated that draft legislation is expected to be published during 2021, allowing for a technical consultation ahead of its inclusion in the Finance Bill.

Read the consultation on the GOV.UK website

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