Meaning of an offshore fund: Introduction - S355 TIOPA 2010
The definition of an offshore fund is limited to ‘mutual funds’ which take one of three forms and which are resident in, or based in, a territory outside the United Kingdom.
The meaning of the term ‘mutual fund’ is given by section 356 TIOPA 2010, and is explained in more detail at OFM05000 onwards. Those pages discuss each type of mutual fund in more detail, but broadly the definition is applied to a company, trust or any other vehicle or arrangement that meets the following characteristics -
- it is not UK tax resident;
- it exists to enable participants to take part in the benefits arising from acquisition, holding, managing, or disposing of assets of any description;
- the participants do not have day-to-day control of the management of the property whether or not they have the right to be consulted or give directions; and
- a reasonable investor would expect to be able to realise any investment based entirely or almost entirely by reference to the net asset value of the assets under management or, alternatively, by reference to an index of any description.
The three forms of mutual funds that fall within the definition of an offshore fund are -
- a mutual fund constituted by a body corporate resident outside the United Kingdom (Section 355(1)(a) - see OFM04200)
- a mutual fund under which property is held on trust for the participants by trustees resident outside the United Kingdom (section 355(1)(b) - see OFM04300); and
- a mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom (section 355(1)(c) - see OFM04400).
Foreign partnerships within the scope of section 355(1)(c) are specifically excluded from the meaning of an offshore fund given by section 355(2) TIOPA 2010.
See OFM03200 for examples of the types of arrangements that are within the definition of an offshore fund, and OFM03300 for examples of the types of arrangements that are not within the definition of an offshore fund.