The Offshore Funds Regulations 2004

Explanatory Note

(This note is not part of the Regulations)

These Regulations modify the application of provisions of Chapter 5 of Part 17 of the Income and Corporation Taxes Act 1988 (c. 1: “ICTA 1988”) in respect of offshore funds.

Offshore funds are collective investment schemes which are not resident in the United Kingdom. The Finance Act 2004 (c. 12) introduced changes to the definition of “offshore fund” for the purposes of qualifying for “distributor status”. This allows parts of a fund and classes of interest within a fund to qualify independently of other parts of the fund or other classes of interest in the same fund. These Regulations modify the relevant primary legislation and deal with administrative, procedural and transitional matters arising from the 2004 changes.

Regulation 1 provides for the citation, commencement and effect of the Regulations. Section 145(2)(b) of the Finance Act 2004 provides that regulations made under a power conferred by virtue of any of the amendments contained in Schedule 26 to that Act may be made so as to have effect in relation to an account period ending on or after the day on which that Act was passed.

Regulation 2 provides for the interpretation of some terms used in the Regulations.

Regulations 3, 4 and 5 respectively modify section 758 of ICTA 1988 and Schedules 27 and 28 to that Act in relation to—

• a part of an umbrella fund (as defined in section 756B(1)) which is regarded as a separate offshore fund by virtue of section 756B(2); and

• a class of interest within a main fund (as defined in section 756C(1)) which is regarded as a separate offshore fund by virtue of section 756C(1)(b).

Regulation 6 and 7 consequentially modify other enactments in relation to the operation of Schedules 27 and 28 to ICTA 1988 as they apply for the purposes of Chapter 5 of Part 17.

Regulation 6 provides modifications, where an existing umbrella fund has not made an election under either or both of paragraph 1(3) or 2(3) of Schedule 26 to the Finance Act 2004, in respect of new parts of the fund which are treated as separate offshore funds for the purposes of Chapter 5 of Part 17.

Regulation 7 provides modifications, where an existing main fund has not made an election under those provisions, in respect of new classes of interest which are treated as separate offshore funds for the purposes of that Chapter.

These Regulations do not impose new costs on business.