The UK Government’s public consultation on Asset Holding companies (AHCs) has just finished, having run from December 15, 2020 to February 23, 2021. The objectives of the UK Government in the consultation have been to improve the Government’s understanding of AHCs, the fund structures in which they are used, and the commercial drivers of their location, as well as to introduce legislative changes which bring clear benefits by facilitating the flows of capital, income and gains between investors and the underlying investments in the AHCs. The first consultation document was published in March 2020 as part of the UK Treasury’s 2020 Budget (First Consultation). The second consultation document (Second Consultation) was published in December 2020, and initiated the public consultation period which has just recently closed.
In summary, the Second Consultation has focused on attempting to reduce a number of key roadblocks in designing a workable and attractive regime for UK AHCs. We have summarized some of the key aspects of the Second Consultation below, and have considered some of the challenges for the Government in each of those featured areas.
If all the challenges identified in the Second Consultations can be solved at a tax policy and political level within the UK Government, there is a chance that the UK AHC regime may offer an effective and favorable UK tax regime compared to other domestic investment structures, and possibly may be compelling when placed alongside international competitors. The fascination in watching the progress of the Second Consultation is that the UK’s position in a post-Brexit, and post-COVID, Europe might provide the stimulus for ambitious reforms. What is just as uncertain, however, is the extent to which other, more familiar, pressures of fiscal austerity and fears of tax base erosion might militate against radical changes.