Legalize / United Kingdom / Public General Act

Finance Act 2022

Type Public General Act

Publication 2022-02-24

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) the value of those shares reflects the value of an asset in respect of which a chargeable gain (“the underlying gain”) accrues, or would accrue if paragraph 18 were ignored, to another company as a result of paragraph 17(2) on the same day as, or before, the relevant gain accrued,

the relevant gain is to be reduced (on a just and reasonable basis and not to below nil) by an amount reflecting the amount of the underlying gain.

Ring fencing of QAHC business

20

(1) For the purposes of this Schedule “QAHC ring fence business” in relation to a QAHC means the business of carrying out its main activity (see paragraph 13(1)(a)) in relation to—

(a) overseas land, to the extent income generated from that land is exempt from corporation tax as a result of paragraph 52(1) (exemption for overseas property income of a QAHC);

(b) qualifying shares (see paragraph 53);

(c) any creditor relationship of the QAHC to the extent the QAHC is not party to it for the purposes of a trade or a UK property business;

(d) any derivative contract to the extent that the underlying subject matter of the contract is overseas land falling within paragraph (a), qualifying shares or debt;

(e) any derivative contract to the extent that the QAHC is party to it for the purposes of carrying out its main activity in relation to any of the things mentioned in paragraphs (a) to (d).

(2) A QAHC ring fence business of a QAHC is to be treated for corporation tax purposes as separate and distinct from—

(a) all other activities carried on by the QAHC,

(b) any activity carried on by the QAHC before it became a QAHC, and

(3) For the purposes of calculating the amount of corporation tax payable by a QAHC, the QAHC’s ring fence business is to be treated as a separate company distinct from the QAHC carrying on any other activity (including any activity carried on before or after it is a QAHC).

(4) Accordingly—

(a) no loss of a QAHC arising outside its QAHC ring fence business may be set off against profits of that business (including any loss made by a company before it became a QAHC), and

(b) no loss arising within a QAHC ring fence business may be set off against profits of any other activity carried on by the QAHC (including any activity carried on by it before it became, or after it has ceased to be, a QAHC).

(5) But despite sub-paragraph (3) a QAHC is to provide a single company tax return relating to its QAHC ring fence business and any other activities carried on while it is a QAHC.

(6) Where any asset, receipt (including any credit), loss or gain relates to both the QAHC ring fence business and to the other activities of the QAHC (whether they are carried on while it is a QAHC or not) that asset, receipt, loss or gain is to be apportioned (on a just and reasonable basis) between the QAHC ring fence business and the other activities of the QAHC.

(7) In sub-paragraphs (4) and (6) references to a loss include references to a deficit, expense, charge or allowance.

(8) Losses or other amounts surrendered under Part 5 or 5A of CTA 10 (group relief)—

(a) that arise within the QAHC ring fence business of a QAHC may only be set off against profits of another company if that company is a QAHC and those profits arose within the QAHC ring fence business of that company;

(b) that do not arise within a QAHC ring fence business of the company surrendering them may not be set off against profits of a QAHC that arise within its QAHC ring fence business.

(9) Where a company and a QAHC have, in accordance with section 171A(4) of TCGA 1992, elected to transfer a chargeable gain or an allowable loss to the QAHC, that gain or loss arises outside its QAHC ring fence business.

(10) A distribution received by a QAHC that, as a result of Chapter 6 of Part 12 of CTA 2010 (Real Estate Investment Trusts), is treated as profits of a UK property business is received outside its QAHC ring fence business.

(11) In this paragraph “creditor relationship” has the meaning it has in Part 5 of CTA 2009 (see section 302 of that Act).

Disapplication of Part 7ZA of CTA 2010

21

In determining the profits of a QAHC ring fence business, Part 7ZA of CTA 2010 (restrictions on obtaining certain deductions) is to be ignored.

Assets entering and leaving the ring fence

22

(1) Sub-paragraph (2) applies to an asset held by a QAHC outside its QAHC ring fence business if that asset enters that ring fence business (whether because of a change of use or status of the asset or otherwise) and the asset is one of the following—

(a) overseas land;

(b) a 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 (including any such relationship or contract that the QAHC was not party to for those purposes before it entered the ring fence business), and

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

(2) Where this sub-paragraph applies to an asset, that asset is treated, for the purposes of corporation tax, as sold by the QAHC immediately before it entered the QAHC ring fence business and reacquired immediately after it entered that ring fence business.

(3) Any chargeable gain or allowable loss accruing to a QAHC on a deemed sale under paragraph (2) arises outside its QAHC ring fence business.

(4) Sub-paragraph (5) applies to an asset held by a QAHC within its QAHC ring fence business if that asset leaves that ring fence business (whether because of a change of use or status of the asset or otherwise) and the asset is one of the following—

(a) overseas land;

(b) a loan relationship or derivative contract that, when it was held within the ring fence business, the QAHC was 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 was attributable to those purposes, and

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

(5) Where this sub-paragraph applies to an asset, that asset is treated, for the purposes of corporation tax, as sold by the QAHC immediately before it left the QAHC ring fence business and reacquired immediately after it left that ring fence business.

(6) Any chargeable gain or allowable loss accruing to a QAHC on a deemed sale under paragraph (5) arises within its QAHC ring fence business.

(7) A sale and reacquisition deemed under sub-paragraph (2) or (5) is to be treated as being for a consideration equal to the market value of the assets.

(8) 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) or (5) of this paragraph.

Adjustment of gains to avoid double charge on assets crossing the ringfence

23

Where—

(a) a chargeable gain (the “relevant gain”) accrues to a QAHC under paragraph 22(2) on a deemed sale of shares,

(b) the extent of that gain reflects the proceeds of a disposal of another asset in respect of which a chargeable gain (“the taxed gain”) has accrued to any person,

the relevant gain is to be reduced (on a just and reasonable basis and not to below nil) by an amount reflecting the amount of the taxed gain.

Information to be provided for accounting periods

24

(1) A company that is, or has been, a QAHC must send a return to HMRC in relation to each accounting period for which it is a QAHC containing the following information (whether or not that information is included in its company tax return)—

(a) the name and Unique Taxpayer Reference of the QAHC,

(b) the name, Unique Taxpayer Reference (if any) and address of any person who has provided investment management services to the QAHC during the course of that accounting period,

(c) an estimate of the market value of the assets of the QAHC’s ring fence business as at the end of that accounting period, and

(d) statements of—

(i) the gross proceeds arising from disposals of assets from the ring fence business during the accounting period, and

(ii) the amounts of any payments made by the QAHC on the redemption, repayment or purchase of its own shares.

(2) Where investment management services are provided to the QAHC by a partnership, the reference in sub-paragraph (1)(b) to a person providing investment management services is to the partnership and not to any partner who may be providing those services in the course of the partnership’s business.

(3) The Treasury may by regulations amend sub-paragraph (1) so as to add to, vary or omit items in the list of information to be contained in a return under this paragraph.

(4) A return under this paragraph must be provided before the end of the filing date for the company tax return for the accounting period to which the return relates.

(5) Where a QAHC fails to provide a return under this paragraph by that time, the QAHC is liable to a penalty of £300.

(6) Paragraphs 18 to 23 of Schedule 55 to FA 2009 (penalty for failure to make returns etc) apply to a penalty under sub-paragraph (5) as they apply to a penalty under a paragraph of that Schedule as if—

(a) in paragraph 18, sub-paragraphs (4) to (7) were omitted,

(b) in paragraph 19—

(i) in sub-paragraph (1), for “on or before the later of date A and (where it applies) date B” there were substituted “before the end of the period of 6 years beginning with the date on which the QAHC became liable to the penalty”, and

(ii) sub-paragraphs (2) to (5) were omitted,

(d) in paragraph 22, sub-paragraphs (2) to (4) were omitted, and

(e) in paragraph 23(1), paragraph (b) were omitted.

PART 3 — Ceasing to be a QAHC

Exit notification

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

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,

(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

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

(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,

(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

(7) Those persons are—

(a) the QAHC;

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

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

Wind-down period

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

(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

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

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

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);

(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

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.

PART 4 — Groups

Acquisition of assets into and out of QAHC ring fence business from other member of group

33

(1) This paragraph applies to a disposal by a company to a QAHC of any of the following at a time when the company and the QAHC are members of the same group, other than a disposal from any QAHC ring fence business of the company—

(a) any overseas land;

(b) any loan relationship or derivative contract the QAHC will, following its acquisition, be 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 will be exempt from corporation tax as a result of paragraph 52(4);

(d) any other asset that will, as a result of the disposal, be within the QAHC ring fence business of the QAHC.

(2) This paragraph also applies to the disposal by a QAHC of any assets within its QAHC ring fence business to a company at a time when the QAHC and the company are members of the same group, unless the assets will, as a result of the transfer, be within a QAHC ring fence business of the company.

(3) The following do not apply to a disposal to which this paragraph applies—

(a) section 171 of TCGA 1992 (transfers within a group: general provisions);

(b) section 336 of CTA 2009 (transfers of loans on group transactions);

Continuity of substantial shareholdings between group members

34

(1) Where—

(a) A QAHC (“Q”) holds a substantial shareholding in a company as a result of a disposal of qualifying shares to it from a company (“G”) made at a time when Q and G are members of the same group,

(b) immediately before the disposal, G held a substantial shareholding in that company as a result of holding the shares that were disposed of,

(d) following the disposal Q holds those shares until they have been held by G and Q between them for a total period of 12 months (whether or not Q remains a QAHC at the end of that period), and

(e) if the shares had instead been held by Q throughout that entire period and Q were to dispose of them immediately after the end of that period, any gain on that disposal would not be a chargeable gain as a result of an exemption under Part 1 of Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding),

any gain accruing to G on the disposal to Q is not a chargeable gain.

(2) But in determining, for the purposes of sub-paragraph (1)(e), whether a gain on a disposal would not be a chargeable gain as a result of an exemption under Part 1 of Schedule 7AC to TCGA 1992, that Schedule has effect as if—

(a) paragraph 9 of that Schedule (aggregation of holdings of group companies) were omitted,

(b) paragraph 11 of that Schedule were omitted, and

(c) in paragraph 19(1), the references to the time of the disposal were instead to the end of the 12 month period referred to in sub-paragraph (1)(d).

(3) Where—

(a) a company that has ceased to be a QAHC (“C”) acquired (when it was a QAHC) shares from a company (“G”) as a result of a transfer described in paragraph 33 (1) (disposal to QAHC by member of same group),

(b) immediately before the disposal, G held a substantial shareholding in a company as a result of holding the shares that were disposed of,

(d) following the disposal C holds those shares until they have been held by G and the C between them for a total period of 12 months,

C is, for the purposes of paragraph 7 of Schedule 7AC to TCGA 1992, to be deemed to have held the shares for that entire period.

Meaning of “group” in paragraphs 33 and 34

35

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gain or loss arising where section 179 of TCGA 1992 applies in relation to transfer of assets

36

(1) This paragraph applies where—

(a) section 179 of TCGA 1992 (company ceasing to be a member of group) applies in relation to the acquisition of an asset (“the relevant asset”), other than an exempt asset, by a company (“A”) from another company (“B”),

(b) a chargeable gain or an allowable loss would have accrued to B on a disposal of qualifying shares, but did not as B was a QAHC at the time of the disposal of those shares (see paragraph 53), and

(c) that gain or loss would have been adjusted as a result of subsection (3D) or (3E) of that section by reference to a chargeable gain or an allowable loss that would, in the absence of subsection (3A), have accrued to A under subsection (3) in relation to the relevant asset.

(2) Where a chargeable gain would have accrued to A, a chargeable gain in the same amount is treated as accruing to B outside its QAHC ring fence business.

(3) Where an allowable loss would have accrued to A, an allowable loss in the same amount is treated as accruing to B outside its QAHC ring fence business.

(4) Assets are exempt assets if a gain accruing to a QAHC on a disposal of such assets would not be a chargeable gain as a result of paragraph 53 (no chargeable gain on disposal of overseas land or qualifying shares).

PART 5 — Close companies, exchange gains and basis of accounting

Non-close QAHCs treated as close companies for certain purposes

37

Chapters 3 to 3B of Part 10 of CTA 2010 (charge to tax in case of loan to participator etc) apply to a QAHC that is not a close company as if the QAHC were a close company.

Exchange gains

38

(1) The Loan Relationships and Derivative Contracts (Exchange Gains and Losses using Fair Value Accounting) Regulations 2005 (S.I. 2005/3422) are amended as follows.

(2) In regulation 2 (interpretation), after the definition of “loan relationship” insert—

“QAHC” has the same meaning as in Schedule 2 to FA 2022;

(3) In regulation 5 (exchange gain or loss arising from loan relationship assets or liabilities), after paragraph (3) insert—

(4) But where paragraph (1) applies in relation to loan relationship assets or liabilities of a QAHC and— (a) an amount is recognised in the QAHC‘s accounts which arises from comparing at different times the fair value of the asset or liability (or in the case of regulation 5(1)(b) any part of it), and (b) the change in fair value is attributable to any extent to fluctuations in the spot rate of exchange between the base currency of the QAHC and— (i) the currency in which the asset or liability is denominated, or (ii) another currency which is relevant to the value of the asset or liability, the exchange gain or loss is instead calculated as set out in paragraph (5). (5) The exchange gain or loss for any accounting period is the change in fair value between the earlier and the later time in that period that is attributable only to fluctuations in the spot rate of exchange between that currency, or those currencies, and the base currency of the QAHC.

Amortised cost basis not required for certain connected companies relationships

39

(1) Section 349 of CTA 2009 (application of amortised cost basis to connected companies relationships) does not apply to a debtor relationship that is a connected companies relationship of a QAHC to the extent the money received under it is used to lend money under, or is used on the acquisition of, loan relationships falling within sub-paragraph (2).

(2) A loan relationship falls within this sub-paragraph if—

(a) it is a creditor relationship of the QAHC,

(b) it is dealt with in the QAHC’s accounts on the basis of fair value accounting,

(c) credits and debits which are to be brought into account for the purposes of Part 5 of CTA 2009 in respect of the relationship are not determined on an amortised cost basis of accounting.

(3) In this paragraph “creditor relationship”, “debtor relationship”, “fair value accounting”, “amortised cost basis of accounting” and “connected companies relationship” have the meanings they have in Part 5 of CTA 2009 (see sections 302, 313 and 348 of that Act).

PART 6 — Transfer pricing and corporate interest restriction rules

Transfer pricing: participation condition always met for investors in a QAHC etc

40

(1) For the purposes of section 147(1) of TIOPA 2010 (basic pre-condition), where the affected persons are—

(a) a QAHC, and

(b) a person with a sufficient connection to the QAHC,

the participation condition in section 148 of that Act is treated as met.

(2) An affected person (“A”) has a sufficient connection to the QAHC if—

(a) A has a relevant interest in the QAHC or in an enhanced class of the QAHC, or

(b) any of the persons with such an interest has a relationship with A such that the participation condition in that section would have been met had the affected persons been A and that person (instead of A and the QAHC).

(3) In this paragraph, and in paragraph 41, “affected person” is to be construed in accordance with Part 4 of that Act.

Transfer pricing: no small and medium-sized enterprise exemption

41

(1) Section 166(1) of TIOPA 2010 (exemption for small and medium-sized enterprises from basic transfer pricing rule) does not apply to a potentially advantaged person if that person or the other affected person is a QAHC.

(2) In this paragraph “potentially advantaged person” is to be construed in accordance with Part 4 of that Act.

Application of corporate interest restriction rules (non-consolidation of certain subsidiaries)

42

(1) Sub-paragraph (2) applies where—

(a) a QAHC is a member of a worldwide group,

(b) the QAHC has a subsidiary (“S”) which it holds as a market value investment,

(d) the management of S and its subsidiaries is not coordinated to any extent with the management by any person of any other entity.

(2) For the purposes of Part 10 of TIOPA 2010 (corporate interest restriction), this paragraph and paragraph 43—

(a) the group does not include S or its subsidiaries, and

(b) accordingly, neither S nor any of its subsidiaries is regarded as a consolidated subsidiary of any member of the group.

(3) For the purposes of this paragraph and paragraph 43, a QAHC holds an interest in an entity as “a market value investment” if—

(a) the QAHC holds the interest as an investment, and

(b) the QAHC judges the value that the interest has to it wholly or mainly by reference to the market value of the interest.

(4) Expressions used in this paragraph or in paragraph 43 that are defined for the purposes of Part 10 of TIOPA 2010 have the same meaning they have in that Part.

(5) In this paragraph, and in paragraph 43, “subsidiary” has the meaning given by international accounting standards (but see section 494 of TIOPA 2010 for the definition of “wholly-owned subsidiary”).

Application of corporate interest restriction rules (consolidation of QAHC stacks)

43

(1) Sub-paragraph (2) applies where—

(a) a QAHC (“P”) would not, apart from that sub-paragraph, be a member of a multi-company worldwide group,

(b) P has a wholly-owned subsidiary (“W”) which it does not hold as a market value investment,

(d) P is either—

(i) not a wholly-owned subsidiary of another QAHC, or

(ii) is such a subsidiary but is held as a market value investment.

(2) For the purposes of Part 10 of TIOPA 2010, paragraph 42 and this paragraph—

(a) P is the ultimate parent of a worldwide group, and

(b) W, and any consolidated subsidiary of W—

(i) is a member of that group and not of any other worldwide group, and

(ii) is a consolidated subsidiary of P.

(3) Sub-paragraph (4) applies where—

(a) a QAHC (“M”) is a member of a multi-company worldwide group (“G”) (including as a result of the application of sub-paragraph (2) or the previous application of this sub-paragraph),

(b) M has a wholly-owned subsidiary (“N”) which it does not hold as a market value investment,

(d) apart from that sub-paragraph, N would not be a member of G.

(4) For the purposes of Part 10 of TIOPA 2010, paragraph 42 and this paragraph, N, and any consolidated subsidiary of N—

(a) is a member of G and not of any other worldwide group, and

(b) is a consolidated subsidiary of M and any other member of G in relation to which M is a consolidated subsidiary.

PART 7 — Treatment of certain amounts payable by a QAHC

Treatment of certain distributions

44

(1) A relevant distribution out of assets of a QAHC in respect of a security of the QAHC is not to be treated as a distribution for the purposes of the Corporation Tax Acts if the QAHC is party to the security for the purposes of its QAHC ring fence business.

(2) Accordingly, among other things, section 465 of CTA 2009 (exclusion of distributions from being taken into account for the purposes of Part 5 of that Act) does not apply to a relevant distribution.

(3) A “relevant distribution” is any interest or distribution in respect of a security of a QAHC if it would, ignoring this paragraph, be a distribution for the purposes of the Corporation Tax Acts only as a result of the security being a relevant security.

(4) In sub-paragraph (3) “relevant security” means a security that—

(a) meets Condition B, C or D, or any combination of those conditions, in section 1015 of CTA 2010 (meaning of “special securities”) and does not meet Condition A or E in that section, or

(b) is a non-commercial security within the meaning of section 1005 of that Act.

(5) Where a QAHC is party to a security partly for the purposes of its QAHC ring fence business and partly for another purpose, only the proportion of a relevant distribution in respect of that security that is attributable to the QAHC ring fence business (apportioned on a just and reasonable basis) is not to be treated as a distribution for the purposes of the Corporation Tax Acts.

Application of hybrid and other mismatches rules where paragraph 44 applies

45

(1) For the purposes of subsection (2) of section 259CB of TIOPA 2010 (hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent), so far as the excess referred to in that subsection arises by reason of a qualified distribution, it is to be taken not to arise by reason of the terms, or any other feature, of the security in respect of which the qualified distribution is made (whether or not it would have arisen by reason of the terms, or any other feature, of the security regardless).

(2) For the purposes of subsection (7) of section 259CB of TIOPA 2010 (hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent), so far as an amount of ordinary income is under taxed by reason of a qualified distribution, it is to be taken not to be under taxed by reason of the terms, or any other feature, of the security in respect of which the qualified distribution is made (even if it would have been under taxed for another reason regardless of the terms, or any other feature, of the security).

(3) That section has effect as if in subsections (4) and (8) after “(9)” there were inserted “and paragraph 45(1) and (2) of Schedule 2 to FA 2022”.

(4) Where a QAHC is obliged to make a qualified distribution as a result of a payment to it, so much of that payment as gives rise to the obligation is to be treated as ordinary income of the QAHC for the purposes of Chapter 3 of Part 6A of TIOPA 2010 (hybrid and other mismatches from financial instruments).

(5) In this paragraph—

“qualified distribution” means a relevant distribution (see paragraph 44) that is not treated as a distribution for the purposes of the Corporation Tax Acts as a result of paragraph 44;

“payment”, “ordinary income” and “under taxed” have the meanings they have in Part 6A of TIOPA 2010 (see sections 259BB, 259BC and 259CC of that Act).

Payments of distributions etc to individual to whom the remittance basis applies

46

(1) Sub-paragraphs (2) and (3) apply in relation to income or a chargeable gain arising to an individual in a tax year if—

(a) section 809B, 809D or 809E of ITA 2007 applied to the individual for that tax year,

(b) the income or gain arises as a result of—

(i) the payment of interest by a QAHC,

(ii) the making of a distribution or a qualified distribution by a QAHC, or

(iii) the disposal by the individual of shares in a QAHC,

(c) in the case of a payment of interest or the making of a distribution or qualified distribution, the individual provided investment management services in connection with investment arrangements to which the QAHC is party, and

(d) in the case of a disposal of shares, the shares were acquired by the individual during the course of the individual providing investment management services in relation to such arrangements.

(2) The foreign proportion of the amount of any such income is to be treated, for the purposes of income tax, as relevant foreign income.

(3) The foreign proportion of the amount of any such gain is to be treated, for the purposes of capital gains tax, as a gain accruing on the disposal of foreign assets.

(4) For the purposes of this paragraph, the “foreign proportion” of an amount of income or of a gain is equal to the proportion of the profits of the QAHC in the relevant period that was derived from foreign sources, apportioned on a just and reasonable basis in accordance with sub-paragraph (6).

(5) The “relevant period” means—

(a) where the QAHC has been a QAHC for at least three accounting periods, the three most recent complete accounting periods of the QAHC, or

(b) otherwise, the period beginning with beginning of the day on which the QAHC became a QAHC and ending with—

(i) where the income or chargeable gain arose to the individual on that day, the end of that day, or

(ii) otherwise, the end of the day before the income or chargeable gain arose to the individual.

(6) For the purposes of determining the proportion of profits of a QAHC that were derived from foreign sources in the relevant period—

(a) include any profits that would have arisen had the QAHC disposed of all of its assets for a consideration equal to the market value of the assets immediately before the end of the period, and

(b) whether profits are derived from foreign sources is to be determined by reference to the ultimate underlying income or assets to which the profits relate (so, for example, the extent to which profits arising from an interest in another company are derived from foreign sources depends on the extent to which the profits of that company are derived from income arising outside the United Kingdom or the disposal of assets outside the United Kingdom).

(6A) Sub-paragraphs (4) to (6) also apply for the purposes of item 22 in the table in section 845H of ITTOIA 2005 (qualifying foreign income for the purposes of foreign income claim) and paragraph (c) of the definition of “qualifying foreign gain” in paragraph 6 of Schedule D1 to TCGA 1992 (foreign gain claims).

(7) In this paragraph—

“foreign asset” has the meaning it has in Schedule 1 to TCGA 1992 (see paragraph 5 of that Schedule);

“profits”, in relation to a company, means income and chargeable gains;

“qualified distribution” has the meaning given by paragraph 45(5).

Purchase of own shares

47

(1) A payment made by a QAHC on the redemption, repayment or purchase of its own shares is not a distribution for the purposes of the Corporation Tax Acts.

(2) But sub-paragraph (1) does not apply to payments in relation to qualifying employment-related securities.

(3) “Qualifying employment-related securities” means employment-related securities acquired by a person, other than a fund manager in relation to the QAHC, where the right or opportunity to acquire the securities or interest is available by reason of an employment of that person or any other person by—

(a) the QAHC, or

(b) a company in which the QAHC has at least a 25% interest.

(4) To determine for the purposes of sub-paragraph (3)(b) whether a QAHC has at least a 25% interest in a company, apply the rules for determining whether a company is a 75% subsidiary of another company for the purposes of Part 5 of CTA 2010 (see section 151 and Chapter 3 of Part 24 of that Act) as if references to “75%” were to “25%”.

(5) In this paragraph—

“employment-related securities” has the meaning given by section 421B of ITEPA 2003;

“fund manager”, in relation to a QAHC, means an individual who provides investment management services in relation to the QAHC ring fence business of the QAHC;

“own shares”, in relation to a company, means shares of the company.

Disapplication of paragraph 47 during cure period for certain non-category A investors

48

(1) Where a QAHC has breached the ownership condition and a cure period applies to the breach, paragraph 47(1) does not apply to payments made to a person who is not a category A investor if—

(a) where the sum of relevant interests in the QAHC held by persons who are not category A investors exceeds 30%, the person has increased their relevant interests in the QAHC on or after the day on which that limit was exceeded, or

(b) where the sum of relevant interests in an enhanced class of the QAHC held by persons who are not category A investors exceeds 30%, the person has increased their relevant interests in that class on or after the day on which that limit was exceeded.

(2) Where —

(a) after the breach the QAHC meets the ownership condition, and

(b) as a result of paragraph 27(4) the breach is treated as having not occurred for the purposes of Part 3 of this Schedule,

sub-paragraph (1) continues to apply to payments made before the QAHC met the ownership condition (despite the fact the breach is treated as not having occurred for the purposes of that Part).

Transactions in securities rules

49

Section 684 of ITA 2007 (person liable to counteraction of income tax advantage) does not apply to a person if—

(a) that section would (ignoring this paragraph) only apply to the person as a result of the person being a party to a transaction in securities, or two or more transactions in securities, where the securities in question are securities of a QAHC, and

(b) the securities are not qualifying employment-related securities (within the meaning given by paragraph 47(3)) in relation to the person.

Late interest

50

(1) Section 373(1) of CTA 2009 (late interest treated as not accruing until paid in some cases) does not apply to a qualifying debit.

(2) For the purpose of this paragraph, a debit is “qualifying” if—

(a) it relates to interest payable under a debtor relationship of a QAHC,

(b) the QAHC is party to the relationship for the purposes of its QAHC ring fence business, and

(3) Where a QAHC is party to a debtor relationship partly for the purposes of its QAHC ring fence business and partly for another purpose, sub-paragraph (1) applies only to the proportion of the qualifying debit that is attributable to the QAHC ring fence business (apportioned on a just and reasonable basis).

(4) In this paragraph “debit” and “debtor relationship” are to be construed in accordance with Part 5 of CTA 2009.

Deeply discounted securities

51

(1) Section 409(2) of CTA 2009 (postponement until redemption of debits for close companies’ deeply discounted securities) does not apply to a qualifying debit.

(2) For the purposes of this paragraph, a debit is “qualifying” if—

(a) it is a debit in respect of a deeply discounted security of the QAHC that relates to the amount of the discount,

(b) the QAHC is party to the security for the purposes of its QAHC ring fence business, and

(3) Where a QAHC is party to a deeply discounted security partly for the purposes of its QAHC ring fence business and partly for another purpose, sub-paragraph (1) applies only to the proportion of the qualifying debit that is attributable to the QAHC ring fence business (apportioned on a just and reasonable basis).

(4) In this paragraph—

“debit” is to be construed in accordance with Part 5 of CTA 2009;

“deeply discounted security” has the meaning it has in Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see section 430 of that Act);

“the discount” has the meaning given by section 406(3) of CTA 2009.

PART 8 — Overseas property income

Overseas property income of a QAHC

52

(1) No liability to corporation tax arises in respect of QAHC overseas property profits to the extent those profits are taxable in a foreign jurisdiction.

(2) “QAHC overseas property profits” means any profits that would, ignoring this paragraph, be chargeable to tax under Chapter 3 of Part 4 of CTA 2009 (profits of property businesses) as profits of an overseas property business of a QAHC.

(3) Profits are taxable in a foreign jurisdiction if they are chargeable to tax (and are neither subject to any exemption or relief from tax nor chargeable at a nil rate) under the law of a territory outside the United Kingdom so far as that tax—

(a) is charged on income and corresponds to United Kingdom income tax, or

(b) is charged on income and corresponds to the United Kingdom charge to corporation tax on income.

(4) No liability to corporation tax arises in respect of profits that arise from loan relationships and derivative contracts that a QAHC is party to for the purposes of an overseas property business of that QAHC to the extent (apportioned on a just and reasonable basis) those profits relate to profits that are exempt from corporation tax as a result of sub-paragraph (1).

(5) Where a QAHC is party to a loan relationship or a derivative contract partly for the purposes of an overseas property business and partly for another purpose, sub-paragraph (4) only applies to the proportion of profits arising from that relationship or contract that are attributable to the overseas property business (apportioned on a just and reasonable basis).

PART 9 — Disposals of overseas land and certain shares

No chargeable gain on disposal of overseas land or certain shares

53

(1) A gain accruing to a QAHC on a disposal of overseas land or qualifying shares is not a chargeable gain.

(2) “Qualifying shares” means any shares apart from shares whose disposal would, in accordance with Part 2 of Schedule 1A to TCGA 1992 (whether asset derives at least 75% of its value from UK land), be regarded as a disposal of an asset deriving at least 75% of its value from UK land.

(3) For the purposes of sub-paragraph (2), “shares” includes—

(a) stock;

(b) any other interest of a member in a company (including a company that has no share capital);

(c) any interest as co-owner of shares (whether the shares are owned jointly or in common and whether or not the interests of the co-owners are equal);

(d) rights of unit holders in unit trust schemes that are treated as if they were shares for the purposes of TCGA 1992 as a result of section 99(1) of that Act;

(e) units in tax transparent funds that are treated as assets for the purposes of that Act as a result of section 103D(3) of that Act;

(f) any derivative contract to the extent that the underlying subject matter of the contract is shares.

(4) In this paragraph—

“derivative contract” means—a derivative contract within the meaning of Part 7 of CTA 2009 (see section 576 of that Act), ora contract which is not a derivative contract within the meaning of that Part only as a result of section 589(2)(b) of that Act (general exclusion of contracts whose underlying subject matter consists of shares);

“unit trust scheme” and “unit holder” have the meaning they have in section 99 of TCGA 1992;

“tax transparent fund” and “units” in relation to such a fund have the meaning they have in section 103D of that Act.

PART 10 — Stamp duty and stamp duty reserve tax

Stamp duty and SDRT exemption for repurchase of own shares or loan capital

54

(1) A transfer to a QAHC of its own shares or own loan capital is exempt from all stamp duties if—

(a) the transfer does not form part of disqualifying arrangements,

(b) the transfer does not take place at a time when there exist arrangements for a substantial sale of the QAHC, and

(c) in the case of a transfer of own shares, the QAHC delivers a return in relation to the transfer of the shares to the registrar of companies in accordance with section 707 of the Companies Act 2006 (return on purchase of own shares).

(2) In this paragraph “own loan capital”, in relation to a company, means loan capital issued by that company.

(3) For the purpose of determining whether a company was a QAHC at the time a transfer of its own shares or own loan capital was made to it, the transfer is to be treated as taking place—

(a) in a case where the agreement to make the transfer is conditional, on the day on which the condition is satisfied, or

(b) in any other case, the day on which the agreement is made.

(4) But a transfer of own shares or own loan capital to a company that ceased being a QAHC as a result of that transfer is to be treated as a transfer to a QAHC.

(5) A transfer of a QAHC’s own shares or own loan capital to it forms part of disqualifying arrangements if it is reasonable to assume that—

(a) that transfer is made in connection with the issue by the QAHC of new shares or new loan capital to a person (“P”) other than the transferor of the QAHC’s own shares or own loan capital, and

(b) the main purpose, or one of the main purposes, of the making of the transfer and the issuing of those shares or loan capital is to secure an outcome which is substantially economically equivalent to a transfer of the QAHC’s own shares or own loan capital, or a part of those shares or that capital, from the transferor to P.

(6) There are arrangements for a substantial sale of the QAHC if—

(a) arrangements exist for the disposal of shares or loan capital, or a mixture of both, that represent at least 90% of relevant interests in the QAHC (determined in accordance with the rules in paragraphs 3 to 6 for determining whether a person has a relevant interest in a QAHC), and

(b) those arrangements will include the acquisition by a person of shares or loan capital that represent a relevant interest in the QAHC.

(7) In this paragraph “loan capital” has the meaning given by section 78(7) of FA 1986, and reference to the issue of loan capital includes the issuing of any rights in connection with the raising of capital.

PART 11 — Exemption from section 874 of ITA 2007 (withholding tax)

55

In Part 15 of ITA 2007 (deduction of income tax at source), after section 888D insert—

(888DA) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest (however the interest arises) by a QAHC (within the meaning of Schedule 2 to FA 2022).

PART 12 — Supplementary

Minor and consequential amendments

56

(1) In section 212 of TCGA 1992 (annual deemed disposal of certain holdings of insurance companies), in subsection (1), at the end of paragraph (c) insert

or, (d) shares in a company which is, or is a member of, a QAHC within the meaning of Schedule 2 to the Finance Act 2022 (qualifying asset holding companies),

(2) In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”) omit the “and” before paragraph (i) and after that paragraph insert

, and (j) paragraph 46(2) of Schedule 2 to FA 2022 (qualifying asset holding companies).

(3) In section 465(3) of CTA 2009 (exclusion of distributions except in tax avoidance cases) omit the “and” before paragraph (d) and after that paragraph insert

, and (e) paragraph 44 of Schedule 2 to FA 2022 (distributions under certain securities issued by qualifying asset holding companies).

Making of notifications and returns

57

(1) HMRC may require that any information required to be given to HMRC by virtue of this Schedule is to be given in such form and manner (including by specified means of electronic communication) as may be specified in a notice published by HMRC.

(2) A notice under sub-paragraph (1) may be amended or withdrawn by HMRC by publication of a further notice.

Interpretation

58

(1) In this Schedule—

“AIF” has the meaning given by regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773);

“category A investor” is to be construed in accordance with paragraph 8;

“collective investment scheme” has the meaning given by section 235 of FISMA 2000;

“company tax return” has the meaning it has in Schedule 18 to FA 1998;

“cure period” is to be construed in accordance with paragraph 27(3) to (5);

“enhanced class” is to be construed in accordance with paragraph 3(3);

“entry notification” is to be construed in accordance with paragraph 14;

“equity holder” has the meaning it has in Part 5 of CTA 2010 (see section 158 of that Act) , but see also paragraph 59 of this Schedule;

“equity securities” has the meaning given by section 560 of the Companies Act 2006;

“exit notification” is to be construed in accordance with paragraph 25;

“fund” and “qualifying fund” are to be construed in accordance with paragraph 9;

“HMRC” means Her Majesty’s Revenue and Customs;

“land” includes—buildings and structures;any estate, interest or right in or over land;land under the sea or otherwise covered by water;

“market value” has the meaning it has in TCGA 1992 (see sections 272 and 273 of that Act);

“own shares” is to be construed in accordance with paragraph 47(5);

“overseas land” means land outside the United Kingdom;

“QAHC ring fence business” has the meaning given by paragraph 20(1);

“qualifying shares” is to be construed in accordance with paragraph 53;

“participant”, in relation to a qualifying fund, means a person who takes part in the arrangements constituting the fund, whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise;

“relevant distribution” has the meaning given by paragraph 44(3);

“relevant interest” is to be construed in accordance with paragraph 3;

“securitisation company” means a company whose profits are brought into account, for corporation tax purposes, in accordance with regulation 14 of the Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296);

“substantial shareholding” is to be construed in accordance with Schedule 7AC to TCGA 1992 (see, in particular, paragraphs 8 and 8A of that Schedule);

“UK REIT” means—a company UK REIT within the meaning of Part 12 of CTA 2010 (see section 524 of that Act), ora company that is a member of a group UK REIT within the meaning of that Part (see sections 523 and 606 of that Act);

“underlying subject matter”, in relation to a derivative contract, is to be construed in accordance with section 583 of CTA 2009 (meaning of “underlying subject matter”);

“wind-down period” is to be construed in accordance with paragraph 28.

(2) References in this Schedule to “investment management services” are to be construed in accordance with the definition of that term in section 809EZE of ITA 2007 as if—

(a) references in that definition to an investment scheme included a QAHC, and

(b) references to participants were, in relation to a QAHC, to persons with a relevant interest in the QAHC.

(3) In this Schedule, apart from in paragraphs 42 and 43 (worldwide groups), references to a company being a member of a group of companies are to be read in accordance with section 170 of TCGA 1992 (interpretation of sections 171 to 181 of that Act: groups).

SCHEDULE 3

1

The amendments made by this Schedule are to Part 12 of CTA 2010 (real estate investment trusts) unless otherwise stated.

Conditions for companies in relation to UK REITs

2

(1) In section 527 (being a UK REIT in relation to an accounting period)—

(a) in subsection (2)(aa), at the end insert “(but see subsection (3A))”;

(b) in subsection (3)(aa), at the end insert “(but see subsection (3A))”;

(3A) Subsections (2)(aa) and (3)(aa) do not apply in relation to a period, or to any part of a period, in respect of which condition C in section 528 is met as a result of subsection (3)(b) of that section.

(2) In section 528 (conditions for company)—

(a) in subsection (3)—

(i) the words from “the shares” to the end become paragraph (a), and

(ii) after that paragraph insert

, or (b) at least 70% of the shares forming the company’s ordinary share capital are owned by one or more institutional investors (see sections 528ZA and 528ZB).

;

(b) after subsection (3) insert—

(3A) Subsection (3B) applies where condition C ceases to be met in relation to a company UK REIT or the principal company of a group UK REIT as a result of subsection (3)(b) ceasing to apply in relation to that company. (3B) The company is to be treated as if condition C continued to be met in relation to that company as a result of that subsection for the period of 12 months beginning with the day on which this subsection begins to apply.

;

(3) After section 528 insert—

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