UK Law and Practice Contributed by: Sam Kay, Philippa List, Mark Stapleton and Nicolas Kokkinos, Dechert LLP
services sector post-Brexit, while preserving high regulatory standards tailored to the UK’s needs. There have been substantive develop - ments in this area since 2022. Qualifying Asset Holding Company In April 2022, the UK introduced a competitive new tax regime for qualifying asset holding com - panies (the QAHC Regime). The QAHC Regime is an elective tax-privileged regime available to certain UK resident asset holding companies that are owned by funds or institutional investment structures in order to hold investment assets. The main focus of the regime is on alternative fund structures, which are typically closed-end - ed, non-retail funds that hold assets across a range of private market investment strategies – chiefly credit, private equity and real estate investments. The QAHC Regime is designed to improve the competitiveness of the UK as a location for asset holding companies (as compared, in particular, to Ireland or Luxembourg) by better enabling the tax-efficient flow of income and gains from the underlying investments back through the fund structure to investors so that, for UK tax purposes, investors are broadly taxed as if they had directly invested in the underlying assets, with the QAHC paying tax on only a small trans - fer-priced margin to reflect the activities that it performs. For non-UK fund structures, a UK QAHC has the advantage that substance (which is becoming increasingly important) can more easily be achieved where the investment man - agement team is in the UK. In broad terms, among other conditions, in order to qualify as a QAHC a company needs to be at least 70% owned by: • qualifying investment funds – ie, funds that:
(a) are widely held; (b) are closely held but held by certain cat - egories of institutional investors (such as most pension funds); or (c) meet a diversity of ownership condition; or • certain institutional investors directly. There is also a requirement that the QAHC does not carry out trading activities. Reserved Investor Fund On 6 March 2024, the UK government pub - lished its response to its consultation on a new type of unauthorised contractual scheme fund structure, referred to as a reserved investor fund (contractual scheme) (RIF), which ended on 9 June 2023. The RIF is designed to com - plement and enhance the UK’s existing funds regime by meeting industry demand for a UK- based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme. The RIF will be open to professional and institutional investors, and it is expected to be particularly attractive for investment in commercial real estate. The RIF is expected to be legislated for in the Finance (No 2) Bill 2024, with detailed tax rules to follow in secondary legislation. Financial Services and Markets Act 2023 On 29 June 2023, the Financial Services and Markets Act 2023 (FSMA 2023) was enacted. Among other things, the FSMA 2023 is intend - ed to implement the findings of HM Treasury’s Future Regulatory Framework (FRF) Review. Launched in light of Brexit, the FRF Review was described by UK Finance as “a once in a genera - tion assessment of the legislative framework in which the financial services regulators operate”. The changes implemented by the FSMA 2023 will involve the revocation of the huge body of
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