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HMRC internal manual

Offshore Funds Manual

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HM Revenue & Customs
Updated
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Definition of an offshore fund: Overview: Arrangements within the definition of an offshore fund

As the operational rules are intended to apply to interests held in certain types of arrangements that have particular characteristics, and those arrangements may be based anywhere in the world, it is not possible to provide a list of all entity types that come within the definition of an offshore fund. The paragraphs below provide a broad overview of the types of arrangements that HMRC consider would come within the definition and should not be considered to be exhaustive: -

Open-ended investment companies (‘OEICs’)

Arrangements that take corporate form and that permit investors to redeem their interests on request or at intervals, entirely or nearly entirely by reference to the net asset value (‘NAV’) of their proportionate share of the scheme property or an index. An example of such a fund would be a Belgian SICAV.

Open-ended contractual arrangements

Arrangements that take contractual form and that permit investors to redeem their interests on request or at intervals, entirely or nearly entirely by reference to the net asset value (‘NAV’) of their proportionate share of the scheme property or an index. An example of such a fund would be a Luxembourg Fonds Commun de Placement (‘FCP) but note that partnerships are specifically excluded from this category by S355(2).

Contractual arrangements are usually transparent for income purposes - there is further guidance on income transparent arrangements, including details of when an offshore income gain will not arise for UK investors, at OFM07000 onwards.

Foreign unit trusts

Arrangements that take trust form where the trustees of the property are not resident in the UK and that permit investors to redeem their interests on request or at intervals, entirely or nearly entirely by reference to the net asset value (‘NAV’) of their proportionate share of the scheme property or an index. An example of such a fund would be a Jersey property unit trust (‘JPUT’). Some foreign unit trusts are transparent for income purposes - there is further guidance on income transparent arrangements, including details of when an offshore income gain will not arise for UK investors, at OFM07000 onwards.

Arrangements with limited life

Arrangements that take corporate form (irrespective of whether they have fixed share capital) or contractual form that come within the definition of a mutual fund at S356 and that have a fixed or determinable life at the end of which investors would be able to redeem their interest in the arrangements entirely or nearly entirely by reference to the NAV of their proportionate share of the scheme property or an index, unless any of the exceptions at S357 apply. An example of such a fund would be a Cayman registered company with a limited life that, although it did not permit redemptions on request, could be reasonably expected to provide redemption by reference to NAV (etc.) at the end of its life.

Further guidance

Further guidance on particular entity types (such as limited life companies) is provided in this manual at OFM10000 onwards. The legislation at Part 8 ITOPA 2010 must still be considered where there is any doubt as to whether a particular set of arrangements come within the definition.

See OFM03300 for the types of arrangements that, in general, HMRC consider would not come within the definition.