Part 8Offshore funds

Tax treatment of participants in offshore funds

356Meaning of “mutual fund”

1

In section 355 “mutual fund” means arrangements with respect to property of any description (including money) that meet conditions A, B and C.

2

Subsection (1) is subject—

a

to the exceptions made by or under sections 357 and 359, and

b

to sections 360 and 361.

3

Condition A is that the purpose or effect of the arrangements is to enable the participants—

a

to participate in the acquisition, holding, management or disposal of the property, or

b

to receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

4

Condition B is that the participants do not have day-to-day control of the management of the property.

5

For the purposes of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions.

6

Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to—

a

the net asset value of the property that is the subject of the arrangements, or

b

an index of any description.

7

The Treasury may by regulations amend condition C.

8

Regulations under subsection (7) may only be made if a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.