IFM41310 - Administrative requirements: non-deliberate breach of ownership condition: sum of interests assets breach

FA22/SCH2/PARAS 26, 27 and 29

Sum of relevant interests held by persons other than category A investors exceeds 50 percent

If the ownership condition is unintentionally breached and a QAHC makes a valid notification to enter a cure period, the QAHC will have 90 days (or longer if agreed by HMRC), beginning on the day in which the QAHC became aware of the breach (or longer if agreed by HMRC), to cure the breach.

But if during the cure period, the QAHC ceases to meet the requirements of PARA 27(3)(a), the company will cease to be a QAHC immediately. PARA 27(3)(a) requires that the sum of relevant interests held by persons other than category A investors does not exceed 50 percent. See IFM40430.

Example

A disposal of shares on 1 June results in persons other than category A investors owning more than 50 percent of relevant interests.

If the QAHC is not already in a breach cure period, it will be ineligible to start one by reason of PARA 27(3)(a) and it must serve a ‘breach and exit’ notification (unless it has already done so in respect of an earlier breach of the ownership condition to which a cure period did not apply). It will exit the regime on 1 June. If on the other hand the QAHC is already in a cure period, PARA 29(5) provides that the cure period terminates on 1 June and so, again, the QAHC exits the regime on that date, and it must serve a ‘breach and exit’ notification.

The company must make the ‘breach and exit’ notification as soon as reasonably practicable after it becomes aware that the 50 percent threshold condition at PARA 27(3)(a) has been breached.