IFM40230 - Eligibility criteria: ownership condition: examples
FA22/SCH2/PARAS 4 to 7
Below are examples of ‘relevant interests’ in qualifying asset holding companies (QAHCs).
1. Qualifying fund (corporate) wholly owns the asset holding company (AHC)
The AHC would qualify to be a QAHC because it is 100 percent owned by a category A investor (a qualifying fund). There is no need to look beyond the category A investor, as no other person has a relevant interest within PARA 4(1).
2. Transparent qualifying fund (partnership) wholly owns the AHC
The AHC would qualify to be a QAHC because it is 100 percent owned by a category A investor (a qualifying fund). All fund investors’ interests are deemed interests of the fund by PARAS 6(2) and 6(3), and so disregarded in their own right. The legislation is effectively treating the transparent fund as a person. There is therefore no need to look beyond the category A investor that is the qualifying fund, as no other person has a relevant interest within PARA 4(1).
3. Partnership (not a transparent qualifying fund) interests are held by both category A investors (80 percent) and non-category A investors (20 percent). The partnership wholly owns the AHC.
The partnership is ignored. The AHC is treated as 20 percent owned by the non-category A investors, per normal principles. PARAS 6(4) to 6(6) ensure any priority profit share relating to management of the investments of the partnership can be ignored, and deem votes to accrue to the partners proportionately to their other interests. The AHC therefore would qualify to be a QAHC because the total non-category A ownership percentage is less than 30 percent.
4. AHC1 wholly owns AHC2. AHC1 is owned by a qualifying fund (75 percent) and a non-category A investor (25 percent). The 25 percent investor has no interest in the qualifying fund.
AHC1 would qualify to be a QAHC because non-category A investors hold total relevant interests of 25 percent (that is, less than 30 percent). If AHC1 meets the other eligibility conditions and chooses to enter into the QAHC regime the same analysis would apply to AHC2. The non-category A investors in AHC1 also hold relevant interests of 25 percent in AHC2 due to PARA 4(1)(c) and no other non-category A investors hold relevant interests in AHC2.
If AHC1 did not become a QAHC, it would not be a category A investor. AHC2 would therefore be wholly owned by a non-category A investor and so would not qualify to be a QAHC. The non-category A investors holding 25 percent of AHC1 would not have relevant interests in AHC2.
5. AHC2 is 80 percent owned by AHC1 and 20 percent owned by a non-category A investor. AHC1 is 75 percent owned by a qualifying fund and 25 percent owned by a non-category A investor.
AHC1 would qualify to be a QAHC – as per example 4, less than 30 percent of its relevant interests are held by non-category A investors. However, even if AHC1 becomes a QAHC, AHC2 would not qualify to be a QAHC. If AHC1 is a QAHC, AHC2 has 20 percent direct non-category A investors, but also another 20 percent indirect non-category A investors (that is 80 percent x 25 percent) within PARA 4(1)(c). The total relevant interest of non-category A investors in AHC2 is therefore 40 percent, over the 30 percent threshold.
