UK asset holding companies consultation: Simmons & Simmons response

Simmons & Simmons strongly supports the development of a simple and certain asset holding company (AHC) tax regime in the UK as part of the wider UK funds review. In particular, our response identifies a number of key principles which should underpin any reform to the taxation of AHCs. These include:

1. the AHC regime would be best established as a standalone regime, rather than an overlay to existing provisions in the UK tax code;

2. the eligibility conditions for the AHC regime should be simple to understand and clear to apply in practice;

3. the regime should be competitive against regimes in jurisdictions such as Luxembourg and Ireland;

4. the regime should adequately cater for the requirements of UK non-domiciled investors by treating income and gains as non-UK source, as otherwise such investors will continue to prefer investment via non-UK AHCs;

5. any provisions dealing with the UK tax position of UK investors in AHCs should sit outside the “core” AHC regime, so that promoters of funds without relevant investors that would wish to use a UK AHC do not need to comply with those aspects of the regime;

6. where possible, it would be preferable to adopt/adapt existing provisions of the UK tax code that apply to UK investors in non-UK AHCs so that these apply to UK AHCs, rather than creating a new separate regime for those UK investors;

7. any regime should be simple to administer in practice, in addition to being readily understandable for fund promoters and investors; and

8. given the principles of Parliamentary sovereignty, consideration should be given to how change of law risks could be addressed, for example whether it might be possible to provide a contractual undertaking to each eligible AHC by way of deed, to the effect that no change of law or tax authority practice may be implemented that would be adverse to the interest of relevant AHCs.