Do I have to file Form 8621 if my UK limited company owns the fund, not me?

Often yes. Section 1298(a)(2)(A) treats you as owning the company's funds proportionately if you own 50 percent or more of the company by value. If the company is itself a PFIC under section 1297(a), section 1298(a)(2)(B) removes that 50 percent limitation and attribution applies at any percentage. Below 50 percent in a non-PFIC company, this route produces no attribution and no Form 8621 for those funds.

Is a UK LLP treated as a partnership for US PFIC purposes?

Not automatically. HMRC treats most LLPs as transparent, but the US answer comes from Regulations section 301.7701-3(b)(2)(i), which defaults a foreign eligible entity whose members all have limited liability to an association taxable as a corporation. Because every UK LLP member has limited liability, partnership treatment requires a Form 8832 election. With that election, section 1298(a)(3) attributes the LLP's funds proportionately with no minimum percentage.

Who files Form 8621 when a UK fund of funds holds other UK funds?

You do, for each PFIC in the chain. Section 1298(a)(2)(B) applies without the 50 percent limitation to a shareholder of a PFIC, so you are treated as owning a proportionate amount by value of the underlying funds, and section 1298(a)(5) applies the rule successively. In practice the constraint is data, because a UK authorised corporate director will not compute your proportionate underlying holdings under US income tax principles.

Can I make a QEF election on a fund I hold through a UK company?

Yes in principle. Regulations section 1.1295-1(d) says only the first United States person in a chain of ownership may make the section 1295 election, and a UK company is not a United States person, so that person is you. The election is only effective if you obtain a PFIC Annual Information Statement meeting Regulations section 1.1295-1(g), which the entity must request from the fund manager on your behalf.

What if the UK entity cannot provide a PFIC Annual Information Statement?

The qualified electing fund route closes for that year. The alternative is the section 1296 mark to market election, but only for marketable stock within section 1296(e). Note that section 1296(g) treats stock held through a foreign partnership as owned directly, and does not extend that treatment to foreign corporations, so an indirect holder through a UK limited company may have no election available and stays in the default section 1291 regime.

Does the 25,000 dollar de minimis exception cover funds attributed to me?

Partly. Regulations section 1.1298-1(c)(2) gives an exception where all PFIC stock owned directly or indirectly is 25,000 dollars or less, or 50,000 dollars on a joint return. PFIC stock owned through another PFIC is excluded from that measurement and tested separately against 5,000 dollars. Any excess distribution or gain treated as an excess distribution during the year removes the exception entirely, and it never changes the underlying tax treatment.

Indirect PFIC Ownership: UK Funds Held in a Company

PFIC reporting UK funds does not stop at the funds standing in your own name. If a UK limited company or a UK LLP holds OEICs, unit trusts, investment trusts or money market funds on its balance sheet, section 1298(a) can treat a US shareholder or member as owning those funds personally, and the Form 8621 obligation lands on the individual US return rather than on the entity. The short answer runs through two doors. Attribution through a corporation requires 50 percent or more by value, unless the corporation is itself a PFIC, in which case the 50 percent limitation falls away entirely. Attribution through a partnership is proportionate, with no threshold at all. Almost every other question, including who files in a chain, who is allowed to make an election, and how the de minimis rule is measured, follows from which door the structure walks through.

This is the part of the PFIC regime that surfaces late in the returns we prepare, usually because nothing in the UK paperwork flags it. A set of statutory accounts shows investments at fair value in a single line. A UK corporation tax computation says nothing about the underlying funds. Nobody at the accountancy firm that prepares the CT600 has any reason to ask whether the shareholder is a US person. The failure mode we see most often is a US citizen who has been diligently filing Form 8621 for the two OEICs in a personal general investment account while ignoring the eight funds sitting inside a family investment company or a professional partnership. This article deals with corporate intermediaries and with partnerships and LLPs. It assumes you already understand direct Form 8621 filing and the mechanics of the elections, and concentrates on what changes when the fund is one or more layers away.

What does indirect PFIC ownership actually mean?

Indirect PFIC ownership is a deeming rule. It treats a US person as owning stock of a passive foreign investment company that the US person does not hold in their own name, because an entity in which they have an interest holds it. Section 1298(a) applies, in its own words, to the extent that the effect is to treat stock of a passive foreign investment company as owned by a United States person. The regulations reinforce that this is not a mechanical exercise. Regulations section 1.1291-1(b)(8)(i) says indirect ownership is determined on the basis of substance rather than the form of ownership, taking into account all the facts and circumstances. That matters when a UK structure has been built for commercial or family reasons and the ownership on the register does not describe the economics.

Once you are an indirect shareholder, the annual reporting obligation in section 1298(f) applies to you in the same way as it applies to a direct holder. The Instructions for Form 8621, revised December 2025 and published at https://www.irs.gov/instructions/i8621, describe an indirect shareholder as including three broad categories.

A person who owns 50 percent or more of a foreign corporation that is not itself a PFIC, where that corporation owns PFIC stock.
A shareholder of a PFIC that itself owns another PFIC, with no minimum percentage.
A direct or indirect owner of a pass-through entity, such as a partnership, where the pass-through entity is itself a direct or indirect shareholder of a PFIC.

The IRS overview page at https://www.irs.gov/forms-pubs/about-form-8621 states the obligation plainly: a US person that is a direct or indirect shareholder of a PFIC files Form 8621. There is no separate short-form return for indirect holdings, and no reduced disclosure. A separate Form 8621 is required for each PFIC, so a UK company holding eight funds generates eight forms for an attributed shareholder, every year, for as long as the holding persists.

Attribution through a UK limited company: the 50 percent rule and its exception

Section 1298(a)(2)(A) is the general corporate attribution rule. If 50 percent or more in value of the stock of a corporation is owned, directly or indirectly, by or for any person, that person is considered as owning the stock owned directly or indirectly by or for the corporation, in that proportion which the value of the stock the person owns bears to the value of all stock in the corporation. Two features of that sentence do the work. The test is by value, not by voting power, so a UK company with alphabet shares or with growth shares carrying limited economic rights can produce a very different answer from the one the share register suggests. And once the 50 percent gate is passed, the attribution is proportionate: a 60 percent shareholder is treated as owning 60 percent of each fund, not all of it.

Below 50 percent by value, the general rule simply does not reach the shareholder. A US person holding 35 percent of a genuine UK trading company that happens to park surplus cash in a sterling money market fund is not, by that route alone, an indirect shareholder of the fund. That is a real and useful outcome, and it is the reason the ownership percentage has to be established before anything else is done.

The exception is where most of the damage is done. Section 1298(a)(2)(B) provides that for purposes of determining whether a shareholder of a passive foreign investment company is treated as owning stock owned directly or indirectly by or for such company, subparagraph (A) is applied without regard to the 50 percent limitation contained in it. In other words, if the UK company through which the funds are held is itself a PFIC, there is no threshold. A 4 percent shareholder is attributed 4 percent of every fund the company holds. This is not an exotic scenario. A UK company qualifies as a PFIC under section 1297(a) if 75 percent or more of its gross income for the year is passive, or if the average percentage of its assets that produce passive income or are held for the production of passive income is at least 50 percent. A family investment company, a dormant former trading company sitting on sale proceeds, or a personal service company that has accumulated a decade of retained profits in funds will often fail one of those tests without anyone noticing the year it happened.

Section 1298(a)(5) then makes the rules cumulative. Stock considered to be owned by a person by reason of the attribution paragraphs is, for purposes of applying those paragraphs, considered as actually owned by that person. A UK holding company owning a UK subsidiary owning a fund platform account is not three separate problems; it is one chain, tested link by link, with the output of each link fed into the next.

UK LLPs: classify the entity before you apply the attribution rule

The single most common error we correct on this topic is assuming that a UK LLP is a partnership for US purposes because it is transparent for UK purposes. HMRC guidance at https://www.gov.uk/hmrc-internal-manuals/partnership-manual/pm131450 confirms the UK position: most LLPs are transparent for tax purposes, so each member is charged to Income Tax or Corporation Tax on their share of the LLP income or gains as if they were members of a general partnership, under section 863 ITTOIA 2005 and section 1273 CTA 2009. The US position is decided separately, by the entity classification regulations.

Regulations section 301.7701-3(b)(2)(i) sets the default classification of a foreign eligible entity. It is an association taxable as a corporation if all members have limited liability. It is a partnership if it has two or more members and at least one member does not have limited liability. It is disregarded if it has a single owner that does not have limited liability. Every member of a UK LLP has limited liability by reason of being a member, which means the default US classification of a UK LLP is an association taxable as a corporation, not a partnership, unless an entity classification election has been filed on Form 8832. Details of that election are at https://www.irs.gov/forms-pubs/about-form-8832.

The consequence for attribution is stark. If the Form 8832 election was made and the LLP is a partnership for US purposes, section 1298(a)(3) applies: stock owned by or for a partnership is considered as being owned proportionately by its partners, with no percentage threshold whatsoever. A member with a 3 percent profit share is an indirect shareholder of every fund the LLP holds. If no election was made, the LLP is a corporation for US purposes, and you are back inside section 1298(a)(2), where the 50 percent by value gate applies unless the LLP itself meets the PFIC tests. An LLP whose balance sheet is mostly investments will meet them. So a professional LLP with a large money market balance can convert a 3 percent member into a Form 8621 filer through either route, but for entirely different reasons and with different documentation needed to prove the position.

Confirm whether a Form 8832 election exists for the LLP, and its effective date, before assuming partnership treatment.
Establish the member's proportionate interest by reference to the LLP agreement, not the Companies House filing.
For a limited company, establish ownership by value, taking account of any share class that carries restricted economic rights.
Test whether the intermediate entity itself meets the section 1297(a) income or asset test for the year in question, because that determines whether any threshold applies at all.
Repeat the test for every year in the period under review; PFIC status of the intermediate entity can switch on and off between years.

A decision tree for a UK entity holding OEICs, unit trusts or money market funds

This is the sequence we work through when a UK company or LLP appears on a client balance sheet with collective investments on it. Work it in order, one year at a time, because the answer can change from year to year.

Step one. Identify the holdings. UK OEICs, authorised unit trusts, offshore reporting and non-reporting funds, listed investment trusts and sterling money market funds are all non-US corporations for US purposes and will generally meet the PFIC tests. A direct holding in gilts, in an individual share, or in cash on deposit is not a PFIC.
Step two. Classify the intermediate entity for US purposes. A UK limited company is a corporation. A UK LLP is a corporation by default and a partnership only if a Form 8832 election was filed. A UK general partnership, in which at least one partner has unlimited liability, is a partnership by default.
Step three. If the intermediate is a partnership for US purposes, stop testing thresholds. Attribution is proportionate under section 1298(a)(3) at any percentage, and the member is an indirect shareholder of each fund.
Step four. If the intermediate is a corporation for US purposes, test whether it is itself a PFIC under section 1297(a). If it is, section 1298(a)(2)(B) removes the 50 percent limitation and attribution applies at any percentage.
Step five. If the intermediate is a corporation and is not a PFIC, apply the 50 percent by value test in section 1298(a)(2)(A). At 50 percent or more, attribution applies proportionately. Below 50 percent, this route produces no attribution.
Step six. If attribution applies, prepare a separate Form 8621 for each attributed fund, and check whether the de minimis exception in Regulations section 1.1298-1(c)(2) removes the annual filing obligation for that year.
Step seven. Separately establish whether the entity itself triggers Form 5471 or Form 8865, and whether the entity's bank and brokerage accounts create an FBAR or Form 8938 obligation for the individual.

The difference between the LLP and the limited company is worth stating on its own. For a limited company, a minority US shareholder can often stand outside the PFIC regime entirely, provided the company is not a PFIC in its own right. For an LLP that has elected partnership treatment, there is no minority shelter at all: the smallest member is attributed their share. That is why we always ask for the Form 8832 position first. It is a one-page fact that changes the entire compliance footprint.

The fund of funds problem: when a PFIC owns another PFIC

The second layer of the problem is the funds themselves. A UK multi-asset fund, a fund of funds range, a target date range, or a feeder arrangement that invests into a master vehicle will hold other collective investments. Because section 1298(a)(2)(B) switches off the 50 percent limitation for shareholders of a PFIC, a holder of the top fund is treated as owning a proportionate amount by value of the underlying funds. Regulations section 1.1291-1(b)(8)(ii)(B) states the same rule from the regulatory side, and section 1298(a)(5) then applies it successively down the chain.

In principle that means a Form 8621 for the top fund and a Form 8621 for each underlying fund. In practice the constraint is data. A UK fund factsheet or annual report will disclose the largest holdings, but it will not tell you the value of your proportionate interest in each underlying vehicle at your year end, and a UK authorised corporate director has no obligation to produce anything computed under US income tax principles. This is where the reporting exception matters, and it is the next question every client asks.

PFIC reporting UK funds in a chain: who actually files Form 8621?

Regulations section 1.1298-1(b)(1) sets the general rule: a United States person that is a shareholder of a PFIC must complete and file Form 8621, and that covers interests held through one or more foreign entities. The relief for indirect holders sits in paragraph (b)(2), and its scope is narrower than most summaries suggest. Paragraph (b)(2)(i) applies to an indirect shareholder that owns an interest in a PFIC through one or more United States persons, and requires that shareholder to file only where, during the year, they are treated as receiving an excess distribution, are treated as recognising gain that is treated as an excess distribution, are required to include an amount in income under section 1293(a), are required to include or deduct an amount under section 1296(a), or are required to report the status of a section 1294 election.

Paragraph (b)(2)(ii) then supplies the exception people rely on. Filing is not required for an indirect shareholder in the section 1293(a) or section 1296(a) categories if another shareholder through which the indirect shareholder owns the interest timely files Form 8621 for that PFIC. There is a carve out where the interest is held through a domestic partnership or S corporation that has made no qualified electing fund election.

Read those two paragraphs together and the UK consequence becomes clear. The relief is built around chains that run through United States persons who are themselves filing. A UK limited company and a UK LLP are not United States persons. They file nothing with the IRS in respect of the funds, and no Form 8621 is generated anywhere in the chain unless a US individual generates it. So in the ordinary UK structure the individual is the filer, and there is no upstream form to point at. The genuine relief in these structures is the de minimis exception, not the intermediate filer exception.

US individual owning 60 percent of a UK limited company that holds four OEICs: the individual files four Forms 8621 with their own return.
US individual who is a 5 percent member of a UK LLP that has elected partnership treatment and holds two money market funds: the individual files two Forms 8621.
US individual holding a UK fund of funds directly: the individual is treated as owning the underlying funds as well, and each is a separate reporting position.
US individual owning an interest through a US partnership that itself holds the UK fund and files Form 8621: the intermediate filer exception in Regulations section 1.1298-1(b)(2)(ii) can apply, subject to the QEF carve out.

The election problem in a chain: who may elect, and what you must obtain

The election question is the one competitors skip, and it is the one with the most money attached. Regulations section 1.1295-1(d) provides that in a chain of ownership only the first United States person that is a shareholder of the PFIC may make the section 1295 qualified electing fund election. In a typical UK structure the chain is US individual, then UK limited company or UK LLP, then fund. Neither UK entity is a United States person, so the first US person in the chain is the individual, and the individual is the person entitled to make the election. That is the good news. The bad news is what the individual has to hold in order to make it.

A qualified electing fund election is only effective if the shareholder can obtain a PFIC Annual Information Statement from the fund for the fund's tax year. Regulations section 1.1295-1(g) sets out what that statement must contain.

The shareholder's pro rata share of the fund's ordinary earnings and net capital gain for the year, or sufficient information to enable the shareholder to calculate it, computed under US income tax principles.
The amount of cash and the fair market value of other property distributed or deemed distributed to the shareholder during the year.
A statement that the fund will permit the shareholder to inspect and copy its permanent books of account, records and other documents needed to establish that ordinary earnings and net capital gain are computed in accordance with US income tax principles.
The information the regulations require to establish that the statement is being furnished for the correct period and to the correct person.

For an indirect holder there is a practical extra step. The fund's records will show the intermediate entity as the shareholder, not you. To make the election you need the intermediate entity to request the statement from the fund manager or platform and to pass it to you, together with evidence of the entity's holding in the fund at each relevant date and evidence of your proportionate interest in the entity. In the returns we prepare, the document that fails most often is not the statement itself but the proportionate interest evidence: a shareholders' agreement that was never updated, or an LLP profit sharing arrangement that varied mid year.

When the intermediate entity will not or cannot produce a PFIC Annual Information Statement, and most UK authorised corporate directors do not produce them at all, the qualified electing fund route closes. The alternative is the section 1296 mark to market election, but only where the stock is marketable within section 1296(e), which covers stock regularly traded on a qualifying exchange and stock of certain foreign corporations comparable to regulated investment companies that offer redemption at net asset value. There is a further trap for indirect holders. Section 1296(g) treats stock owned, directly or indirectly, by or for a foreign partnership as owned proportionately by its partners and as owned directly for purposes of section 1296. Foreign corporations are not within that provision. A US person whose only route to the fund is through a UK limited company therefore cannot rely on section 1296(g) to be treated as owning the fund directly for the mark to market election, while a member of a UK LLP that is a partnership for US purposes can.

Where neither election is available the holding stays in the default section 1291 regime, and the deferred tax and interest charge accrues year by year. That is the argument for restructuring the holding rather than reporting it indefinitely, and it is why we test the election position before we agree a remediation plan. Where earlier years were missed entirely, the interaction with late election relief is set out at https://us-uktax.com/insights/news-and-updates/missed-form-8621-late-qef-election-purging.

Where the CFC overlap rule in section 1297(d) changes the answer, and where it does not

Many UK companies with US owners are controlled foreign corporations. Section 1297(d) provides that a corporation is not treated with respect to a shareholder as a passive foreign investment company during the qualified portion of that shareholder's holding period. The qualified portion is the part of the holding period after 31 December 1997 during which the shareholder is a United States shareholder within the meaning of section 951(b) and the corporation is a controlled foreign corporation. Section 1297(d)(3) then treats the holding period as beginning again on the first day after that qualified portion ends, which is what stops old PFIC years bleeding into the future.

The distinction that gets missed is what the overlap rule protects. It protects the stock of the UK company in the hands of that shareholder. It does not convert the OEICs and money market funds the company holds into something other than PFICs. Those funds are separate foreign corporations, they meet the PFIC tests on their own facts, and the attribution rule keeps running. The Instructions for Form 8621 make the point directly: even if a foreign corporation is not treated as a PFIC with respect to a shareholder under section 1297(d), the attribution rules of section 1298(a)(2)(B) still apply. What section 1297(d) does usefully do is remove the argument that a US shareholder below 50 percent is attributed the funds because the UK company is itself a PFIC. Where the overlap rule applies to that shareholder, the company is not a PFIC as to them, so the 50 percent by value test in section 1298(a)(2)(A) governs again. In a genuine controlled foreign corporation the controlling US shareholders will usually be over that line in any event, and their reporting continues on both fronts, Form 5471 for the company and Form 8621 for the attributed funds.

How attributed holdings affect the de minimis threshold, Form 8938 and FBAR

Regulations section 1.1298-1(c)(2)(i) contains the de minimis exception to the annual section 1298(f) report. It applies where the value of all PFIC stock owned directly or indirectly by the shareholder is 25,000 dollars or less, or 50,000 dollars or less on a joint return, and separately where PFIC stock owned through another PFIC is 5,000 dollars or less. In both cases the exception is lost if the shareholder is treated as receiving an excess distribution or recognising gain treated as an excess distribution during the year.

The measurement rule in paragraph (c)(2)(ii) is what practitioners get wrong. In valuing the stock against the 25,000 dollar threshold, the shareholder takes into account all PFIC stock owned directly or indirectly under section 1298(a) and Regulations section 1.1291-1(b)(8), but excludes PFIC stock owned through another United States person that is itself a shareholder of the PFIC, and excludes PFIC stock owned through a PFIC under section 1298(a)(2)(B). So funds attributed from a UK limited company that is not itself a PFIC, and funds attributed from an LLP treated as a partnership, are counted in the 25,000 dollar test and can push an otherwise small direct portfolio over the line. Funds attributed through a PFIC are pulled out of that test and measured against the separate 5,000 dollar figure instead. Two clients with identical economics and different intermediate entity status can land on opposite sides of the exception.

Count directly held funds and funds attributed from a non-PFIC intermediate together against the 25,000 dollar or 50,000 dollar figure.
Test funds attributed through a PFIC separately against the 5,000 dollar figure.
Treat the exception as unavailable for any year in which an excess distribution arises or a fund is sold at a gain.
Remember the exception removes the annual information report only; it does not change the tax treatment of income or gains from the holding.

Form 8938 runs on a separate track. An interest in a foreign entity is itself a specified foreign financial asset, and so are the funds. The Instructions for Form 8938 at https://www.irs.gov/instructions/i8938 set thresholds for specified individuals living abroad of more than 200,000 dollars at year end or more than 300,000 dollars at any time during the year for unmarried filers, and more than 400,000 dollars at year end or more than 600,000 dollars at any time for joint filers. Assets reported on Form 8621 are not listed again in the main parts of Form 8938, but their value is still included in determining whether the threshold is met, and the number of Forms 8621 filed is reported in the excepted assets part of Form 8938. Filing Form 8621 therefore reduces duplication, not exposure.

FBAR is different again, and is filed through the FinCEN BSA E-Filing System rather than with the tax return. The IRS comparison at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements confirms that foreign mutual funds are reportable on both forms, that the FBAR obligation arises where the aggregate value of foreign financial accounts exceeds 10,000 dollars at any time in the calendar year, and that an indirect interest in foreign financial accounts held through an entity is reportable where there is a greater than 50 percent interest in the entity. Note the mismatch: the FBAR entity test is greater than 50 percent, while the PFIC corporate attribution test is 50 percent or more, and the PFIC partnership test has no threshold at all. A US member of a UK LLP can easily be a PFIC indirect shareholder and have no FBAR obligation in respect of the LLP's accounts.

A worked example

The following figures are illustrative only and are used to show how the rules interact, not to state any client's facts. Assume a US citizen resident in London owns 60 percent by value of a UK limited company that carries on a genuine consultancy trade. The company holds 900,000 pounds across three sterling money market funds and two multi-asset OEICs, alongside its trading receivables. The company's gross income for the year is 78 percent trading fees and 22 percent interest and dividends, and its passive assets average 41 percent of total assets.

The company is not a PFIC for that year, because gross passive income is below 75 percent and average passive assets are below 50 percent under section 1297(a).
The shareholder owns 50 percent or more by value, so section 1298(a)(2)(A) attributes 60 percent of each fund to her. Five funds means five Forms 8621.
One of the multi-asset OEICs is itself a fund of funds. Section 1298(a)(2)(B) attributes a proportionate share of its underlying funds to her with no threshold, and those are measured against the separate 5,000 dollar de minimis figure.
If the consultancy winds down and the following year the company is 82 percent passive by income, the company becomes a PFIC. From that year, section 1298(a)(2)(B) applies and every US shareholder is attributed the funds regardless of percentage, including a 5 percent minority holder who previously had no PFIC filing at all.
If instead she held only 40 percent of a non-PFIC company, section 1298(a)(2)(A) would not attribute the funds to her, and her Form 8621 obligation for those funds would not arise.

What we ask for when we prepare these returns

Indirect PFIC positions are won or lost on documents, and the documents sit in the UK. Before we can complete a Form 8621 package for an attributed holding we ask for a specific and fairly short list.

The entity's statutory accounts and the underlying investment schedule showing each fund, its ISIN, units held and value at each period end.
The share register or LLP agreement establishing the client's interest by value or profit share for every day of the year, and any Form 8832 entity classification election.
Platform or custodian statements for the entity's investment account, including all purchases, sales, switches and income allocations, since a fund switch is a disposal for US purposes.
Any PFIC Annual Information Statement the fund manager is willing to issue, requested by the entity in its own name.
The intermediate entity's own income and asset analysis for the year, so that its PFIC status under section 1297(a) can be documented rather than assumed.
Prior year US returns showing any earlier Form 8621 filings, elections made, and the holding period history that section 1297(d)(3) can reset.

From there the work is ordinary compliance: classify, attribute, compute, elect where an election is genuinely available, and file. The cross-border preparation work that sits around it, including the Form 5471 or Form 8865 position for the entity itself, is described at https://us-uktax.com/cross-border-tax-planning and https://us-uktax.com/us-tax-services, and the UK side of the same structure at https://us-uktax.com/uk-tax-services. Where the attributed funds were never reported in earlier years and the exposure runs back several returns, the remediation route is usually the Streamlined Filing Compliance Procedures rather than a quiet amendment, and that process is set out at https://us-uktax.com/streamlined-foreign-offshore-procedures. The one thing that never works is treating the UK entity as a wall. Section 1298(a) was written precisely to see through it.