Finance Act 2022

PART 3 U.K. Ceasing to be a QAHC

Exit notification U.K.

25 (1) If a QAHC decides that an entry notification is to cease to be in force in relation to it, it may make a notification to HMRC (an “exit notification”).

(2) An exit notification must—

(a) state the name and Unique Taxpayer Reference of the QAHC;

(b) specify the date on which the entry notification no longer has effect.

(3) The date specified may be no earlier than the day after the day on which the exit notification is made.

(4) An exit notification comes into force on that specified date.

Requirement to notify when conditions no longer met U.K.

26 (1) A QAHC must notify HMRC if a relevant condition ceases to be met in relation to it as soon as reasonably practicable after becoming aware of the breach of the condition.

(2) In sub-paragraph (1) “relevant condition” means any of the conditions in paragraph 2(1), other than the condition in paragraph 2(1)(g) (requirement for entry notification to be in force).

(3) A notification under sub-paragraph (1) must set out—

(a) a description of the breach,

(b) the date on which it occurred,

(c) the date on which the QAHC first became aware of it, and

(d) where the breach is a breach of the ownership condition to which a cure period could apply (see paragraph 27(3))—

(i) whether the QAHC intends to rely on that period, and

(ii) if so, what steps (if any) the QAHC has taken, or expects to take, in order to secure the meeting of the ownership condition before the end of that period.

Curing of certain breaches U.K.

27 (1) Sub-paragraph (2) applies to a breach by a QAHC of the activity condition (see paragraph 13(1)) if—

(a) the breach is not deliberate,

(b) the QAHC has given HMRC a notification in relation to the breach in accordance with paragraph 26, and

(c) the QAHC has secured that the breach has ceased as soon as reasonably practicable.

(2) Where this sub-paragraph applies to a breach of the activity condition, the breach is treated, for the purposes of this Part of this Schedule, as if it had not occurred.

(3) A cure period applies to a breach of the ownership condition (see paragraph 3) in relation to a QAHC if—

(a) the sum of relevant interests in the QAHC or in an enhanced class of the QAHC held by persons who are not category A investors does not exceed 50% (whether as a result of the breach or at any time afterwards),

(b) the breach is not deliberate,

(c) the QAHC has complied with paragraph 12 (requirement to take reasonable steps to monitor compliance), and

(d) the QAHC has given HMRC a notification in relation to the breach in accordance with paragraph 26 that states the QAHC intends to rely on the cure period.

(4) Where—

(a) a cure period applies to a breach of the ownership condition, and

(b) before the end of the cure period, the QAHC meets that condition,

the breach is treated, for the purposes of this Part of this Schedule, as if had not occurred.

(5) The “cure period” in relation to a breach of the ownership condition is—

(a) the period of 90 days beginning with the day on which the QAHC became aware of the breach, or

(b) such longer period beginning with that day as HMRC may in writing agree.

(6) A breach of a condition is deliberate if—

(a) it occurred as a result of anything done by any of the persons mentioned in sub-paragraph (7),

(b) that person knew that one of the consequences of doing that thing would be a breach of that condition, and

(c) it would have been reasonable for the person to avoid doing that thing.

(7) Those persons are—

(a) the QAHC;

(b) a director, or any other person involved in the management, of the QAHC;

(c) a person with relevant interests in the QAHC, or in an enhanced class of the QAHC, of 25% or more;

(d) a director, or any other person involved in the management, of a person referred to in paragraph (c).

Wind-down period U.K.

28 (1) A wind-down period applies to a breach of the ownership condition in relation to a QAHC where—

(a) the breach is a result of—

(i) a qualifying fund with a relevant interest in the QAHC, or in an enhanced class of the QAHC, ceasing to be a category A investor, or

(ii) the purchase or redemption by the QAHC of a relevant interest in the QAHC, or a relevant interest in an enhanced class of the QAHC,

(b) at the time the QAHC becomes aware of the breach it intends to cease its QAHC ring fence business as soon as reasonably practicable, and

(c) the QAHC has notified HMRC of that intention as soon as reasonably practicable after it becomes aware of the breach.

(2) A notification under sub-paragraph (1)(c) must—

(a) state the date on which the ownership condition was breached,

(b) state the date on which the QAHC first became aware of the breach,

(c) include a declaration by the QAHC that it reasonably expects to have sold all of its assets in the QAHC ring fence business within two years of the QAHC becoming aware of the breach.

(3) The “wind-down period” in relation to a breach of the ownership condition is—

(a) the period of 2 years beginning with the day on which the QAHC became aware of the breach, or

(b) such longer period beginning with that day as HMRC may in writing agree.

(4) But a wind-down period ceases to apply to a breach of the ownership condition immediately on the acquisition of any assets, or the raising of any capital (whether by the issuing of securities or otherwise), by a QAHC during that period.

(5) Sub-paragraph (4) does not apply to—

(a) the acquisition of assets where those assets are reasonably required in connection with the ceasing of the QAHC’s ring fence business, or

(b) the acquisition of assets, or the raising of capital, if that acquisition or raising of capital is reasonably necessary to prevent the insolvency of the QAHC or a person in which the QAHC has an interest.

(6) A QAHC must notify HMRC of any acquisition of assets, or raising of capital during a wind-down period (whether capable of causing the wind-down period to cease or not).

Exiting the regime U.K.

29 (1) A QAHC ceases to be a QAHC as a result of ceasing to meet any of the conditions mentioned in paragraph 2.

(2) The general rule is that a breach of a condition will cause a QAHC to cease to be a QAHC immediately after the condition ceases to be met.

But sub-paragraphs (3) to (7) contain different rules in relation to certain types of breach.

(3) A breach of the activity condition causes a QAHC to cease to be a QAHC immediately after the time at which the QAHC becomes aware of the breach (but see paragraph 27(1) and (2) which may allow a breach to be retrospectively cured).

(4) A breach of the ownership condition to which a cure period applies will cause a QAHC to cease to be a QAHC at the end of the last day of that period (if the breach was not cured during the period).

(5) But where a breach of the ownership condition was subject to a cure period and the cure period ceases to apply as a result of paragraph (a) of paragraph 27(3) (sum of relevant interests held by persons other than category A investors exceeds 50%) no longer being satisfied, the QAHC ceases to be a QAHC immediately after the time at which that paragraph ceases to be satisfied.

(6) A breach of the ownership condition to which a wind-down period applies will cause a QAHC to cease to be a QAHC at the end of the last day of that period.

(7) But where a wind-down period ceases to apply to a breach of the ownership condition as a result of paragraph 28(4) (no acquisition of assets or raising of capital during wind-down), the QAHC ceases to be a QAHC immediately after the time at which the wind-down period ceases to apply.

Timings of transactions that lead to breach of ownership condition U.K.

30 (1) For the purposes of determining whether the ownership condition is breached, a transfer of relevant interests in a QAHC, or in an enhanced class of a QAHC, is to be treated as effective at the earlier of—

(a) the time when the obligations of the parties to the transfer necessary to effect the transfer have been met, and

(b) the time when any of the substantive consideration for the transfer has been provided,

(instead of at any earlier time when the transfer is effective).

(2) In sub-paragraph (1)(b) the reference to “substantive consideration” means any amount of the consideration for the transfer other than any amount provided before the transfer which would not be refundable if the transfer did not take place as a result of the transferee not meeting its obligations under the arrangements to make the transfer.

(3) But sub-paragraph (1) does not apply if—

(a) one or more of the parties to the transfer have acted in connection with the transfer with the aim of securing a tax advantage that arises as a result of the application of sub-paragraph (1) (for example by delaying the point at which consideration is provided), and

(b) it is reasonable to conclude that to act in that fashion is contrived, is abnormal or lacks a genuine commercial purpose.

(4) For the purposes of sub-paragraph (3) “tax advantage” is to be construed in accordance with section 1139 of CTA 2010.

Corporation tax consequences of ceasing to be a QAHC U.K.

31 (1) For the purposes of corporation tax, when a QAHC ceases to be a QAHC—

(a) a new accounting period begins on at the beginning of the day after the day on which it ceased to be a QAHC, and

(b) accordingly, its previous accounting period ended at the end of the day on which it ceased to be a QAHC.

(2) The following are to be treated, for the purposes of corporation tax, as sold by a QAHC immediately before it ceased to be a QAHC and reacquired by that company immediately after the start of that new accounting period—

(a) any overseas land it holds;

(b) any loan relationship or derivative contract the QAHC is party to for the purposes of an overseas property business of the QAHC, to the extent (apportioned on a just and reasonable basis)—

(i) the relationship or contract is attributable to those purposes, and

(ii) profits arising from that relationship or contract were exempt from corporation tax as a result of paragraph 52(4);

(c) any qualifying shares it holds.

(3) The sale and reacquisition deemed under sub-paragraph (2) is to be treated as being for a consideration equal to the market value of the assets immediately before the QAHC ceased to be a QAHC.

(4) Paragraph 11 of Schedule 7AC to TCGA 1992 has effect as if any reference to a “deemed disposal and reacquisition” did not include a deemed sale and reacquisition under sub-paragraph (2) of this paragraph.

Certain interest payments made around exit to be treated as made by a QAHC U.K.

32 Where—

(a) interest is payable under securities of a company in connection with arrangements for a transfer of relevant interests in that company, or in an enhanced class of that company, and

(b) that company ceased to be a QAHC as a result of that transfer,

any payment of that interest made on the same day as the company ceased to be a QAHC after it ceased being a QAHC is to be treated as a payment of interest by a QAHC.