Offshore funds: ‘private equity’ exception

Historically private equity investments (tax-transparent limited partnership owns tax-opaque master holding company typically in Luxembourg which invests in trading companies in different jurisdictions) were outside the scope of the UK’s offshore funds regime. While the master holding company would be an ‘offshore fund’ under ICTA 1988 s 756A (being a collective investment scheme constituted by a non-UK resident company) the expected life of such arrangements (typically ten years) meant that interests in the master holding company (held through the limited partnership) were not ‘material interests’ under ICTA 1988 s 759. Consequently any gain arising on a disposal of such interests was not treated as an offshore income gain.

The offshore fund definition (now...