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Amendments will be made to the Genuine Diversity of Ownership (GDO) conditions that apply for the purposes of the Qualifying Asset Holding Company (QAHC); Real Estate Investment Trust (REIT) and Non-Resident Capital Gains (NRCG) rules. The purpose of the condition is to prevent funds that are restricted to a small number of predetermined investors from benefitting from the regimes. The changes will improve the operation of the GDO condition for fund structures involving multiple pooling vehicles.
Under the current rules the GDO condition needs to be satisfied by reference to an individual investment entity considered in isolation, which can mean that a particular entity does not satisfy the condition. The proposed amendments will provide that where an individual investment entity forms part of a wider fund arrangement, it can satisfy the GDO condition by reference to the arrangements as a whole, for example where a fund structure involves two or more separate entities which form part of the same fund arrangement.
Certain investment vehicles which do not currently satisfy the genuine GDO condition and are part of a wider investment structure could be affected.
The amendments will take effect from Royal Assent of the Spring Finance Bill 2023.
At Budget 2020, the government announced that it would carry out a review of the UK funds regime, covering tax and relevant areas of regulation. As part of that review, in December 2022 the government commenced a review of the GDO condition, to be undertaken in consultation with a working group comprised of industry stakeholders. The proposed amendments should ensure that the condition operates as intended and does not prevent genuinely diverse fund structures from benefitting from the regimes.