Offshore funds

The key issues in deciding whether a fund is within the offshore funds provisions are the ‘character’ and ‘nature’ of the fund.

First and foremost it has to be a ‘collective investment scheme’ (which term is defined in section 235 Financial Services and Markets Act 2000) and that the form of the arrangements is within one of three broad categories

  • an open-ended company that is resident outside the UK,
  • a unit trust scheme whose trustees are not resident in the UK


  • any arrangements, not within the two categories above, established under the law of a territory other than the UK and which, under that law, create rights in the nature of co- ownership.

From 19 July 2007, the definition of open-ended investment company for offshore fund purposes will be as set out in section 236 FSMA 2000 but without the restriction of the ‘reasonable period’ condition of section 236(3)(a) FSMA 2000.

An offshore fund is defined within tax legislation under sections 756A–C and, in addition to the above, an offshore fund will also include


  • sub-funds of an umbrella fund, but not the umbrella fund itself
  • classes of interest in a fund, but not the main fund itself.

Where a fund is fiscally transparent for income, it will only be treated as a distributing fund if it meets the relevant tests.


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