Taxes Consolidation Act 1997 Schedule 19 paragraph 12

Offshore funds with interests in dealing and management companies

Paragraph 12 of Schedule 19 provides an exception to the distributing fund shareholding limit, allowing an offshore fund to hold shares in subsidiary companies that carry out dealing or management functions on the fund's behalf.

• An offshore fund's shareholding in a dealing subsidiary or a subsidiary management company is disregarded when testing whether the fund meets the distribution condition in section 744(3)(c).
• A dealing subsidiary must be wholly owned by the fund, must deal exclusively in material interests in the fund as part of the fund's management and administration, and must not be entitled to any distribution on the interests it holds.
• A subsidiary management company must carry on no business other than providing administrative, management, advisory, or property-holding services to the fund (or to it and other offshore funds with an interest in the company), and must be remunerated at no more than an arm's length rate.
• A subsidiary management company may itself have wholly-owned subsidiaries; if so, the business and remuneration tests are applied to the group of companies taken together.

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