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HMRC internal manual

Offshore Funds Manual

From
HM Revenue & Customs
Updated
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Particular arrangements: Fixed share capital companies

It is expected that very few fixed share capital companies will fall within the new definition. So, for example, an investment in a trading or investment company or group with fixed share capital which does not have limited life (even if local law provides for continuation votes) would not come within the definition. But under the characteristics based approach, entities that have fixed share capital and that are structured in such a way that they share characteristics of open-ended share capital arrangements (that is, the share capital expands and contracts in response to demand) will be within the definition.

So, fixed share capital companies that are predicated on the basis that investors are able to redeem their interest to get a net asset value (or indexed) return or a return which is very close to net asset value may fall within the new definition (if conditions A and B at TIOPA 2010/S356 are satisfied and none of the exceptions at TIOPA2010/S357 apply). That will also be the case where there are no redemption rights but the arrangements have a limited life and a reasonable investor could expect to get a net asset value return on winding up.

The following pages consider specific examples of fixed share capital arrangements and their interaction with the offshore funds tax definition in more detail.