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Budget 2020: The UK – a domicile of choice for closed ended alternative fund holding vehicles?

Among the government’s publications immediately following today’s Budget, was confirmation that the government will conduct a review of the UK funds regime. The driver behind the review is to consider whether there is any merit for policy change.

The review will take place during 2020 and will include direct and indirect tax as well as the relevant regulatory framework.

One publication included HM Treasury beginning a consultation (the “Consultation”) on the tax treatment of asset holding companies in alternative fund structures and how policy change might attract such asset holding companies to the UK.

In a post-Brexit world, and with the vast sector aligned infrastructure already in place in the UK, the government is giving serious thought as to how it might make the UK an even more attractive jurisdiction of choice for the alternative asset management sector is a welcome move.

Illiquid closed ended Private Equity, Real Estate and Credit Funds typically hold their underlying investments through intermediate holding vehicles (referred to in the Consultation as 'asset holding companies' or 'AHCs').  These AHCs are invariably established outside of the UK. 

 

As part of the Consultation, the government notes the UK’s extensive treaty network, an extensive distribution exemption, no dividend withholding tax, the extension to the UK’s substantial shareholder exemption rules and the lowest rate of corporation tax in the G20 (at 19%).  

 

However, despite such pull factors, the government wishes to understand why AHCs are typically established outside of the UK and what policy measures could be amended or adopted to attract such entities to the UK. 

 

To the extent any amendments will clearly facilitate flows of capital, income and gains through UK AHCs, the government has made it clear that it is prepared to make legislative changes following the conclusion to the Consultation.

The Consultation will run until 20 May 2020.  

Read more on the Budget here.

About the author

Antoine Housden

+44 (0) 7923 222 415
housdena@buzzacott.co.uk
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The review will take place during 2020 and will include direct and indirect tax as well as the relevant regulatory framework.

One publication included HM Treasury beginning a consultation (the “Consultation”) on the tax treatment of asset holding companies in alternative fund structures and how policy change might attract such asset holding companies to the UK.

In a post-Brexit world, and with the vast sector aligned infrastructure already in place in the UK, the government is giving serious thought as to how it might make the UK an even more attractive jurisdiction of choice for the alternative asset management sector is a welcome move.

Illiquid closed ended Private Equity, Real Estate and Credit Funds typically hold their underlying investments through intermediate holding vehicles (referred to in the Consultation as 'asset holding companies' or 'AHCs').  These AHCs are invariably established outside of the UK. 

 

As part of the Consultation, the government notes the UK’s extensive treaty network, an extensive distribution exemption, no dividend withholding tax, the extension to the UK’s substantial shareholder exemption rules and the lowest rate of corporation tax in the G20 (at 19%).  

 

However, despite such pull factors, the government wishes to understand why AHCs are typically established outside of the UK and what policy measures could be amended or adopted to attract such entities to the UK. 

 

To the extent any amendments will clearly facilitate flows of capital, income and gains through UK AHCs, the government has made it clear that it is prepared to make legislative changes following the conclusion to the Consultation.

The Consultation will run until 20 May 2020.  

Read more on the Budget here.

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Should you wish to discuss the impact of the Consultation on your business or fund products, please do not hesitate to contact us.

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