OSFG01110 - Particular Situations

Umbrella Funds

Funds frequently offer to investors more than one class of share, unit etc. There might be two typical structures

1. What is formally one fund is in reality a series of separate funds each with its own class of interests and matched assets
   
2. One pool of assets but with both income and accumulation classes of interest.

Treatment of Umbrella Funds

• Each sub-fund and each class of interest is treated as an offshore fund in its own right
• The umbrella fund is not treated as an offshore fund
• The distribution test ( OSFG01060) will apply to each sub-fund or class of interest
• Where an umbrella fund existed at 21 July 2004, any new sub-funds or classes of interest coming into existence after that date will calculate their UKEP on the same basis as the rest of the umbrella fund
• In relation to classes of interest, the investment restrictions test under section 760(3)(a) ICTA 1988 ( OSFG01090) and the de minimis test under paragraph 1(2) Schedule 27 ( OSFG01080) will apply to the immediate fund or sub-fund to which that class of interest belongs.

Protected Cell Companies

These are similar to umbrella funds, having a number of sub funds, but crucially investors do not have the right to switch between sub funds. Subject to meeting all the relevant requirements it is possible that each ‘cell’ could be regarded as an offshore fund in its own right within the meaning of section 756A ICTA 1988. However, each case will be determined on the particular facts of that case and it is possible that a “cell” may not be regarded as an offshore fund in its own right.

Funds Transparent for Income

Even though the distribution test may have been satisfied by virtue of paragraph 3 Schedule 27 ICTA 1988 in respect of funds that are fiscally transparent for income there still remains a requirement to satisfy the investment restrictions test within section 760 (3)(a) and paragraph 6 Schedule 27 ICTA 1988 ( OSFG01090).