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HM Revenue and Customs has updated its definitions regarding offshore funds, to address concerns from advisors and fund managers that some funds have fallen outside the remit of the offshore funds regime for tax purposes.
The Finance Act 2007 is intended to ensure, following offshore company formation, that an open ended company is not prevented from being an offshore fund in which investers can have material interests purely because of failing the "reasonable period" test in section 236 of the Financial Services and Markets Act 2000 (FSMA).
In a statement, the organisation said: "It has been suggested that this FSMA test may result in companies in which investors are able to realize their interests in under seven years being excluded from the definition of a collective investment scheme at section 235 FSMA, and thereby outside the scope of the offshore funds regime."
"Some advisers and fund managers have raised concerns that this may bring some offshore companies within the rules that were previously not considered to be open-ended for the purposes of either FSA regulation or the offshore fund regime."
According to the HMRC, it should be presumed from a taxation point-of-view that any company with fixed capital is not defined as an offshore fund, unless there are special conditions.
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