UK-managed private equity funds long held their deals through holding companies abroad. Since April 2022, a manager can keep that company in the UK under the qualifying asset holding company (QAHC) regime. Funds owned mostly by pension schemes and other institutions may not need it, because a 2017 exemption already applies to their gains on shares.
Why fund holding companies were based abroad
The government’s 2020 consultation explained why funds chose other jurisdictions. Those jurisdictions offered strong treaty networks and broad exemptions for gains on shares. UK rules treat a buyback of shares as an income distribution. Credit funds relied on securitization regimes elsewhere.
Respondents named Luxembourg as the main competitor. Its participation exemption applies to a 10% stake, or to a stake that cost at least €1.2 million for dividends and €6 million for gains. Ireland’s section 110 regime offers tax-neutral securitization to companies with €10 million of qualifying assets.
How a QAHC is taxed
Section 14 and Schedule 2 of the Finance Act 2022 contain the regime. The regime took effect on April 1, 2022, for corporation tax and stamp taxes. Its aim is to tax investors broadly as if they held the underlying assets.
| What the QAHC earns or pays | How Schedule 2 taxes it |
| Gains on overseas land and on shares | No tax on the gain, except on shares in a UK property-rich company, since those don’t qualify |
| Profits of an overseas property business | Exempt where another country already taxes them |
| Interest on profit-participating loans | The QAHC can still deduct it, and HMRC doesn’t treat it as a distribution |
| Interest the QAHC pays to lenders | Paid without UK income tax withheld |
| A buyback of its own shares | Individual investors get capital treatment, except managers of investee companies. No stamp duty or stamp duty reserve tax is due |
Rules on late-paid interest and deeply discounted securities don’t apply to a QAHC. It can deduct interest as it accrues, even if it pays connected investors later.
Investment managers
Schedule 2 also looks through a QAHC for some investment managers. Distributions that reflect the QAHC’s foreign assets can count as foreign income or gains in their hands. Before April 6, 2025, that treatment benefited managers taxed on the remittance basis.
Since then, the regime for foreign income and gains of new UK residents has broadly replicated it. The Finance Act 2026 confirmed that only individuals who provided investment management services can claim the relief. The rules on disguised management fees and carried interest may still apply to their returns.
Who can use the regime?
A QAHC must be a UK resident, unlisted company whose main activity is an investment business. Securitization companies and real estate investment trusts can’t qualify. It may hold listed shares only to take a company private, unless it makes an irrevocable election.
Category A investors are qualifying funds, institutions named in the Schedule, public authorities and certain other companies. Investors outside Category A may hold no more than 30% of the QAHC. A fund qualifies if it meets a diversity of ownership test or isn’t a close company. It also qualifies if Category A investors control at least 70% of it.
What happens on entry
HMRC treats a company that enters the regime as having sold its overseas land and qualifying shares at market value. The substantial shareholding exemption can still relieve that gain once the 12-month holding period is complete. A company that becomes UK resident and enters within 30 days avoids the deemed sale.
Entry begins when the company notifies HMRC online and chooses an entry date after the filing. A new QAHC has two years to meet the ownership condition. A late annual information return costs a fixed £300 penalty.
Losing QAHC status
A company that breaches a condition normally leaves the regime at once. On any exit, HMRC treats the company as having sold and reacquired its assets at market value. HMRC lets it cure a non-deliberate ownership breach within 90 days, provided investors outside Category A hold no more than 50%.
A two-year wind-down applies when an ownership breach results from a share buyback or from a qualifying fund that loses Category A status. The company must tell HMRC it plans to close its QAHC business. Apart from narrow exceptions, the period ends early if the company acquires assets or raises capital.
Changes since 2022
Parliament amended the regime in Finance (No. 2) Act 2023. Securitization companies can’t be QAHCs from March 15, 2023. The same act created the election that treats listed securities as unlisted.
The Budget of November 26, 2025 promised to explore targeted changes with industry. No proposals had appeared by early October 2026. A draft securities transfer tax for 2027 would keep the buyback exemption.
A QAHC that isn’t part of a multinational group is outside Domestic Top-up Tax. The exclusion applies to periods that begin from December 31, 2024. Large fund groups should check how the global minimum tax treats their holding companies, since the exclusion doesn’t reach them.
The 2017 exemption for companies owned by institutional investors
Since April 1, 2017, the substantial shareholding exemption has also applied to a seller owned in large part by qualifying institutional investors (QIIs). The company whose shares are sold doesn’t need to be trading.
| QII ownership of the seller | Tax on the gain |
| 80% or more | The whole gain is exempt |
| At least 25% but under 80% | The exempt part of the gain equals the QII percentage |
| Below 25% | Relief only if the usual trading conditions are met |
A holding that costs £20 million or more also counts as substantial when the seller qualifies for this relief. Pension schemes, life insurers, sovereign wealth funds, charities, certain investment funds and, since March 19, 2025, exempt reserved investor funds count as QIIs.
FAQ
Can a QAHC hold UK real estate?
Yes, but gains on UK land stay taxable. The QAHC exemption reaches only overseas land and qualifying shares. A QAHC that sells shares in a company drawing at least three-quarters of its value from UK land will also pay tax on the gain.
How many QAHCs exist?
HMRC hasn’t published a count of registrations. Before launch, it estimated that about 1,100 businesses owned companies eligible for the regime. Its costing put the annual revenue loss at £20 million by 2026-27.
What profit will HMRC expect a QAHC to report?
A QAHC limited to administrative work is likely to meet the conditions for low value-adding services, HMRC says. Those services usually carry a 5% markup on cost, and the QAHC pays corporation tax on that margin.