UK and International Tax news

Government Launches Further Consultation On Tax Reform And Asset Holding Companies

Wednesday 16th December 2020

The Government has recently issued its response to its consultation on the tax treatment of asset holding companies in alternative fund structures.

In the March 2020 Budget, the government announced a consultation on the tax treatment of asset holding companies [AHC] in alternative fund structures. Three important themes arose from the consultation responses.

First, respondents suggested that the scale of the UK’s asset management sector, its good infrastructure and skilled workforce would make this a competitive location for AHCs if barriers in the UK tax system could be addressed.

Second, respondents said that the establishment of AHCs in the UK could bring economic and fiscal benefits, primarily by bolstering the asset management sector and creating additional jobs in associated service sectors.

Third, respondents set out areas where the UK tax rules currently create barriers to the establishment of AHCs. Many agreed with the suggestion that the government address these barriers through a new regime for AHCs.

Respondents also proposed changes to the UK’s existing Real Estate Investment Trust (REIT) regime, to better allow UK REITs to serve as AHCs for investment in real estate.

The government has considered the responses and believes that there is both a clear policy justification and a strong economic and fiscal case for reform in this area.

It has now launched a second stage consultation on detailed design features of a new regime for AHCs with the aim of delivering an internationally competitive tax regime that will remove barriers to the establishment of these companies in the UK.

The consultation will also consider targeted changes to the REIT regime, where these could have immediate benefits in making the UK a more competitive location for holding real estate assets.

The consultation will close on 23 February 2021. Draft legislation will be published later in 2021 for a period of technical consultation ahead of its inclusion in the Finance Bill.

If you would like more details on the above, please contact Keith Rushen on 0207 486 2378.

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