US UK Tax Accountants Hedge Fund PFIC Exposure Guide |

US UK Tax Accountants Hedge Fund PFIC Exposure Guide |

US UK Tax Accountants: Hedge Fund PFIC Exposure Guide

US UK Tax Accountants on Hidden PFIC Exposure

A UK-resident US citizen who invests in a London-based hedge fund through a Cayman Islands feeder — as most institutional and HNW investors do — is almost certainly holding a passive foreign investment company interest, and may be accumulating a US tax liability at punitive excess distribution rates on every year of return without a single document from the fund manager warning them of the obligation. Furthermore, US and UK tax accountants who work across both systems encounter this issue constantly: the PFIC rules are invisible to UK wealth managers, UK fund administrators, and UK accountants who have no training in US international tax, and the hedge fund investor who pays UK income tax or CGT on their fund returns assumes that it satisfies any tax obligation. Consequently, years of accrued PFIC interest charges — calculated by the IRS under the underpayment rate for each year of the holding period — can produce an effective US tax rate substantially above 50% when the fund interest is eventually redeemed, with no possibility of correcting it retroactively without significant penalty and interest.

This article is written for US citizens who are UK residents and invest in hedge funds, funds of funds, or other collective investment vehicles through non-US structures—typically Cayman, Irish, or Luxembourg feeder funds. By the end of this guide, you will understand why hedge fund investments generate hidden PFIC exposure, what US and UK tax accountants do to identify and manage that exposure before it crystallizes, and the practical steps for regularising missed Form 8621 filings through the IRS streamlined procedures.

What Are US and UK Tax Accountants?

US and UK tax accountants are cross-border tax professionals qualified and practicing simultaneously in both US federal tax and UK tax, with the specific expertise to advise clients on the interaction between the two systems for complex investment structures, including hedge funds, fund of funds, and multi-strategy vehicles. Furthermore, the specific expertise required to manage hedge fund PFIC exposure combines knowledge of the PFIC income test, the asset test, the look-through rules for funds of funds, the three available PFIC regimes — excess distribution, QEF election, and mark-to-market — and the FATCA and Form 8621 reporting obligations, with an understanding of the UK's treatment of the same fund returns under the offshore fund rules in Part 9 of the Taxation of International and Other Provisions Act 2010. Specifically, the UK offshore fund rules impose income tax at the income tax rate on gains from offshore funds that do not have reporting fund status, while reporting funds allow capital gains treatment — creating a further layer of interaction with the US PFIC analysis that must be modeled simultaneously.

The IRS guidance on PFIC classification and Form 8621 is at https://www.irs.gov/forms-pubs/about-form-8621. Furthermore, the most common PFIC situation for UK-resident US citizens is holding an interest in a Cayman Islands feeder fund that invests in an underlying hedge fund, since Cayman exempted companies and certain other structures meet the PFIC income or asset test under IRC Section 1297.

Why Hedge Fund PFIC Exposure Matters More in 2026

The FATCA Reporting Pipeline and PFIC Discovery

Since 2014, Cayman Islands financial institutions — including hedge fund administrators and Cayman feeder fund directors — have been required to report US account holders and US beneficial owners to the Cayman Tax Information Authority under the US-Cayman FATCA Model 1B IGA, which then exchanges that information with the IRS. Furthermore, by 2026, the IRS will have accumulated significant FATCA data on US persons holding interests in Cayman hedge fund feeders, and the agency will actively cross-reference that data against Form 8621 filings to identify US investors who hold PFIC interests but have not reported them. Consequently, a UK-resident US citizen who has invested in a Cayman feeder fund for five years without filing Form 8621 has almost certainly been reported to the IRS through the FATCA institutional reporting, making voluntary correction through the streamlined procedures more urgent than waiting for IRS contact to force the issue.

The Statute of Limitations Stays Open for Non-Filing

A US tax return that omits a required Form 8621 — for a PFIC interest that meets the reporting threshold — has an open statute of limitations for that year indefinitely. Furthermore, the IRS can assess PFIC tax on any open year, regardless of how much time has passed, meaning a fund investment made in 2018 without Form 8621 filings can still be assessed in 2030 or later. Consequently, the indefinite statute of limitations on PFIC non-filing years creates a permanent ongoing liability that grows with each additional year of non-filing, making early correction through the streamlined procedures significantly less expensive than waiting for IRS discovery. According to https://www.aicpa.org, the open statute of limitations for PFIC-related non-filing is one of the most significant long-term risks for US investors in non-US funds who have not established an annual Form 8621 compliance program.

Fund of Funds and Look-Through PFIC Classification

A specific and widely misunderstood aspect of the PFIC rules for hedge fund investors is the look-through requirement for fund-of-funds structures. Specifically, where a UK-resident US citizen invests in a fund of funds — a vehicle that invests in multiple underlying hedge funds — each underlying fund held by the fund of funds is a potential separate PFIC. The investor may have an indirect PFIC interest in each underlying fund through their direct interest in the fund of funds. Furthermore, the look-through applies only when the fund of funds holds 25% or more of the value of the underlying PFIC — a threshold commonly met in concentrated fund-of-funds structures — thereby causing a single fund-of-funds investment to create PFIC reporting obligations for a dozen or more underlying funds. Consequently, the Form 8621 compliance program for a fund-of-funds investor is substantially more complex than that for a direct hedge fund investor. It requires fund-level information from both the fund of funds and each underlying fund.

How Hedge Funds Create PFIC Exposure for US Investors

The PFIC Income Test and Asset Test

A foreign corporation meets the PFIC income test if 75% or more of its gross income for the taxable year is passive income, including dividends, interest, rents, royalties, and gains from the sale of property that produces passive income. Furthermore, a foreign corporation meets the PFIC asset test if 50% or more of the average value of its assets during the taxable year produces or is held to produce passive income. Consequently, a Cayman Islands hedge fund feeder — whose portfolio consists entirely of long and short positions in publicly traded equities and derivatives, generating dividends, interest, and trading gains — almost certainly meets both the income test and the asset test, classifying it as a PFIC for every US person who directly or indirectly holds an interest in it.

Additionally, even hedge funds that pursue more active trading strategies — including commodity trading, volatility arbitrage, or credit trading — typically produce income that is passive for PFIC purposes, since the PFIC income test uses the character of the income at the fund level rather than the character that might be assigned to the strategy from an economic perspective. Furthermore, the exception for banking and insurance companies — which can produce passive-type income without being PFICs — generally does not apply to hedge funds that are not regulated as banks or insurance companies in their home jurisdiction. The IRS technical analysis of the PFIC income and asset tests is set out in the Form 8621 instructions at https://www.irs.gov/forms-pubs/about-form-8621.

The Three PFIC Regimes and Their Consequences

The default PFIC regime — the excess distribution regime — applies automatically where no election has been made and taxes any excess distribution (any distribution in excess of 125% of the average distributions received in the prior three years) and any gain on the disposition of the PFIC interest at ordinary income rates, with an interest charge applied on the notional tax for each year of the holding period at the IRS underpayment rate. Furthermore, for a hedge fund investment held for seven years with a substantial gain on redemption and no distributions during the holding period — a common pattern for accumulating share class investments — the entire gain is an excess distribution in the year of redemption, taxed at ordinary income rates plus a seven-year interest charge that can produce a combined effective rate above 60% on the gain. Consequently, the excess distribution regime is the most punitive of the three available regimes for long-term accumulating hedge fund investments. It should be avoided whenever possible through an election, provided the fund can provide the necessary information.

The qualified electing fund (QEF) election under IRC Section 1295 allows the investor to include their pro rata share of the PFIC's ordinary income and net capital gain in their US taxable income annually, thereby avoiding the excess distribution regime. Furthermore, the QEF election is generally the most tax-efficient regime for long-term investors in appreciating funds, since it converts future distributions and gains from ordinary income (under the excess distribution regime) to capital-gain treatment when the fund's income is predominantly of a capital nature. However, the QEF election requires the fund to provide a PFIC Annual Information Statement — a document that most hedge fund administrators do not prepare as a standard practice — making the QEF election practically unavailable for most investors unless the fund has specifically agreed to provide the statement.

The mark-to-market election under IRC Section 1296 requires the investor to recognize gain or loss on the PFIC interest annually based on changes in fair market value, with gains taxed as ordinary income and losses allowed only to the extent of prior mark-to-market gains. Furthermore, the mark-to-market election is available only for PFIC interests that are regularly traded on an established securities market — a condition that most Cayman feeder fund interests do not satisfy — making this election practically unavailable to the majority of UK-resident US-citizen hedge fund investors.

The UK Offshore Fund Rules and Interaction with PFIC

The UK's offshore fund rules under Part 9 of the Taxation of International and Other Provisions Act 2010 impose income tax at the income tax rate on gains from offshore funds that do not have UK reporting fund status, while gains from reporting funds are treated as capital gains subject to CGT. Furthermore, most Cayman hedge fund feeders do not have UK reporting fund status — since obtaining and maintaining that status involves high ongoing costs and compliance obligations — meaning that UK income tax at 45% applies to gains from Cayman fund redemptions for UK additional-rate taxpayers. Consequently, a UK-resident US citizen redeeming a Cayman hedge fund interest faces both the UK income tax at 45% on the gain under the offshore fund rules and the US PFIC excess distribution tax plus interest charge on the same gain — creating a genuine double taxation exposure that the foreign tax credit mechanism can only partially resolve, since the US PFIC interest charge is not an income tax and is therefore not creditable. The HMRC guidance on offshore funds is at https://www.gov.uk/hmrc-internal-manuals/investment-funds-manual/ifm12000.

Identifying and Managing Hedge Fund PFIC Exposure: Steps

Step 1 — Identify all offshore fund investments and confirm their PFIC status.

Compile a complete inventory of every fund investment held directly or through a brokerage account — including Cayman feeders, Irish UCITS funds, Luxembourg SICAVs, and any other non-US collective investment vehicle — and assess whether each fund meets the PFIC income or asset test. Furthermore, for each fund, obtain its prospectus or offering memorandum and review its investment strategy to confirm whether the fund's income is predominantly passive under the PFIC rules. Additionally, assess the look-through rules for any fund-of-funds investments by requesting the underlying fund list from the fund administrator and applying the 25% look-through threshold to each underlying holding.

Step 2 — Assess which PFIC regime applies to each fund investment.

For each fund confirmed as a PFIC, determine which of the three regimes applies — excess distribution (default), QEF election, or mark-to-market — and assess the availability of the preferred election for each fund. Furthermore, contact each fund administrator to request the PFIC Annual Information Statement that would support a QEF election, and assess the fund's willingness to provide it, as some fund managers will provide it on request for US investors, while others will not. Additionally, confirm whether any fund interests are listed on an established securities market — which is unusual for most Cayman feeders but may apply to exchange-listed investment trusts or closed-end funds — since the mark-to-market election is only available for listed interests.

Step 3 — Identify all missed Form 8621 filings for each PFIC.

Confirm whether Form 8621 has been filed for each PFIC interest for every year since acquisition. Furthermore, where Form 8621 has not been filed, calculate the statute of limitations exposure — which remains open indefinitely for years with a missing Form 8621 — and assess the total penalty and interest exposure under the excess distribution regime for each year of non-filing. Additionally, determine whether the missed filings can be corrected through the IRS streamlined procedures — applicable where the non-compliance was non-wilful, and the investor meets the foreign residency test — or whether the Delinquent International Information Return Submission Procedures are more appropriate for investors whose income tax returns are otherwise current.

Step 4 — Calculate the excess distribution for the full holding period.

For each PFIC in the default excess distribution regime, calculate the accumulated excess distribution for the full period from acquisition to the current date — or to the date of redemption if the fund has already been exited. Furthermore, apply the IRS underpayment rate for each prior year to the notional tax on the excess distribution allocated to that year, and calculate the total interest charge as a fixed dollar amount that will be added to the income tax on the excess distribution in the year of the calculation. Additionally, model the combined excess distribution tax plus interest charge as an effective tax rate on the total gain to determine whether the combined rate exceeds the rate under a QEF election, and use that comparison to support the election choice for the current and future years. The IRS underpayment rate is published quarterly at https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-second-quarter-of-2025.

Step 5 — Prepare the streamlined submission for missed PFIC filings.

Prepare three years of amended or original Form 1040 returns, including Form 8621 for each PFIC interest in each covered year, along with the FBAR filings for the brokerage accounts holding the fund interests and any personal accounts connected to the fund investment. Furthermore, draft the non-wilfulness narrative on Form 14653 addressing the specific circumstances of the PFIC non-reporting — typically the investor's reliance on UK tax advice and the absence of any US adviser in the fund selection process, combined with the absence of any PFIC disclosure in the fund's offering documents. Additionally, calculate the 5% streamlined penalty on the highest aggregate balance across all covered FBAR accounts and include the payment with the submission.

Step 6 — Establish the going-forward annual PFIC compliance program.

Once the historical non-compliance is regularised, establish an annual Form 8621 filing program covering all PFIC interests, including new fund investments made after the streamlined submission. Furthermore, for each fund where the QEF election is available, make the election on the first Form 8621 filed for that fund in the first year of the regularised compliance program, since a QEF election cannot be made retroactively for prior years in which the excess distribution regime applied. Additionally, review the PFIC status of every fund investment annually, since a fund that does not meet the PFIC income or asset test in a given year is not a PFIC for that year, and the annual Form 8621 filing requirement does not apply to non-PFIC years. The IRS Form 8621 instructions are at https://www.irs.gov/forms-pubs/about-form-8621.

Case Study: US Investor in London, Cayman Hedge Fund

Our team was engaged by a US citizen who had lived in London for nine years and held two fund investments through a UK brokerage account — a Cayman Islands exempted company feeder fund investing in a global macro hedge fund, and an Irish UCITS equity fund investing in European equities. The Cayman feeder had been held for seven years with a total investment of $480,000 and a current value of approximately $680,000 — an unrealised gain of $200,000, with no distributions received during the holding period. The Irish UCITS fund had been held for three years with a total investment of $120,000 and a current value of approximately $148,000. No Form 8621 had been filed for either fund for any year of the holding period.

After conducting the full PFIC analysis, we confirmed that both funds were PFICs — the Cayman feeder because its income was entirely passive investment income from the underlying macro fund's trading activities, and the Irish UCITS because its assets were predominantly publicly traded equities generating passive dividend and capital gains income. Furthermore, the Cayman feeder was in the default excess distribution regime for all seven years of the holding period, and the entire $200,000 unrealised gain would constitute an excess distribution in the year of redemption, taxed at ordinary income rates plus a seven-year interest charge. Additionally, we confirmed that the Irish UCITS fund was eligible for the mark-to-market election — since Irish UCITS shares are listed on regulated markets and qualify as regularly traded securities for Section 1296 purposes — providing a significantly more tax-efficient regime than the default excess distribution approach.

For the Cayman feeder, we calculated that the excess distribution tax at 37% on the $200,000 gain would be $74,000, with an additional interest charge at the IRS underpayment rate of approximately 8% applied over the seven-year holding period, producing an additional $41,600 in interest — a total US liability of approximately $115,600 on a $200,000 gain before any foreign tax credit. Furthermore, we confirmed that no UK offshore fund income tax had yet been paid — since the fund had not been redeemed — meaning no foreign tax credit was available to offset the US PFIC liability at this stage. Additionally, for the Irish UCITS fund, we applied the mark-to-market election. We calculated the mark-to-market gain for each of the three covered years, producing a combined US income tax of approximately $14,400 on the $28,000 total mark-to-market gain across the three years.

We prepared a streamlined submission covering three years of amended Form 1040 returns, with Form 8621 for each fund — the Cayman feeder in the excess distribution regime, with a preliminary calculation of the seven-year holding-period interest charge, and the Irish UCITS under the mark-to-market election from the first covered year. Furthermore, the six-year FBAR submission covered the brokerage account holding both fund interests. The 5% streamlined penalty was calculated based on the highest aggregate balance of the brokerage account — approximately $780,000 in the highest-balance year — resulting in a penalty of $39,000. Additionally, we advised the client not to redeem the Cayman feeder until a QEF election could be made going forward — to prevent the full seven-year excess distribution from crystallising — and contacted the fund administrator to request the PFIC Annual Information Statement needed for the QEF election from the current year onwards.

Common Mistakes US Citizens Make with Hedge Fund PFICs

Mistake 1 — Assuming Only Direct PFIC Holdings Require Reporting

Many investors assume that the Form 8621 obligation applies only to their direct interest in the fund — the Cayman feeder — without assessing whether the look-through rules create indirect PFIC interests in the underlying fund's portfolio companies or sub-funds. Furthermore, in fund-of-funds structures, the look-through rules can create dozens of indirect PFIC interests, each requiring its own annual Form 8621 filing, dramatically increasing the compliance burden compared with a simple single-fund investment. The correct approach requires a full look-through analysis of every fund investment to identify all direct and indirect PFIC interests before the first Form 8621 is prepared.

Mistake 2 — Not Making the Mark-to-Market Election for UCITS Funds

Irish and Luxembourg UCITS funds — which are listed on regulated markets and whose shares are regularly traded — are eligible for the mark-to-market election, which is significantly more tax-efficient than the default excess distribution regime for accumulating investors. Furthermore, many investors in Irish UCITS equity funds hold them for years under the default excess distribution regime without realizing that the mark-to-market election was available from the first year of ownership, thereby incurring a growing interest charge on the deferred gain that the election would have avoided. The correct approach is to assess the mark-to-market election eligibility for each UCITS fund holding at the time of the initial Form 8621 filing and to make the election in the first year in which it is available. The IRS PFIC election guidance is at https://www.irs.gov/forms-pubs/about-form-8621.

Mistake 3 — Not Separating the PFIC Interest Charge from the Income Tax

The PFIC excess distribution interest charge — calculated at the IRS underpayment rate for each year of the holding period — is not an income tax and cannot be offset by the foreign tax credit for UK taxes paid on the same gain. Furthermore, many preparers incorrectly calculate the total US liability as a single income tax amount and apply the foreign tax credit against it, resulting in an understated net liability that omits the uncreditable interest charge component. The correct approach requires calculating the excess distribution income tax and the interest charge separately on Form 8621 Part IV, reporting the interest charge on Schedule I-1 of the return as a separate non-creditable charge.

Mistake 4 — Treating the UK Offshore Fund Income Tax as a Full Foreign Tax Credit

Where the UK offshore fund rules impose income tax at 45% on the gain from a Cayman fund redemption — because the fund lacks reporting fund status — the full UK income tax may appear to eliminate any residual US tax liability through the foreign tax credit. Furthermore, this analysis is incorrect because the PFIC excess distribution interest charge cannot be offset by the foreign tax credit, meaning that a portion of the combined US liability always remains, even when the UK income tax rate of 45% fully covers the US income tax element. The correct approach requires calculating the creditable and non-creditable components of the US PFIC liability separately and applying the foreign tax credit only against the creditable income tax element.

Mistake 5 — Redeeming the Fund Before Making a QEF Election

The most financially consequential mistake is redeeming a Cayman hedge fund interest that has been in the default excess distribution regime for several years before making a QEF election — thereby crystallizing the entire holding period's gain as an excess distribution subject to the full interest charge. Furthermore, once the fund is redeemed, the QEF election cannot be made retroactively to convert the prior years from the excess distribution regime to the more favorable QEF treatment. The correct approach is to assess the QEF election availability before any redemption is initiated and to obtain the PFIC Annual Information Statement from the fund administrator for the current year, even if the QEF election cannot cover the prior years. The interest charge on prior excess distribution years can then be limited by making the QEF election prospectively for any continuing PFIC investment.

Mistake 6 — Missing the FBAR for the Fund Brokerage Account

The brokerage account through which the hedge fund interests are held is a foreign financial account for FBAR purposes, held at a non-US financial institution, and its highest annual balance must be reported on FinCEN Form 114 if the aggregate balance across all covered accounts exceeds $10,000. Furthermore, many investors focused on the PFIC Form 8621 compliance gap completely overlook the FBAR obligation for the brokerage account, compounding non-compliance and increasing the streamlined penalty calculation. The correct approach is to identify every brokerage and custody account holding PFIC interests and include all of them in the six-year FBAR calculation before the streamlined submission is prepared. The FBAR guidance is at https://www.fincen.gov/financial-crimes-enforcement-network/fbar.

Get in Touch

At US-UK Tax, our team of Chartered Tax Advisers (CTA), Enrolled Agents (EA), and Certified Public Accountants (CPA) — members of the Chartered Institute of Taxation (CIOT) and the American Institute of CPAs (AICPA) — are US-UK tax accountants who specialize in identifying and managing hidden PFIC exposure in hedge fund portfolios for UK-resident US citizens. Furthermore, we conduct the full PFIC analysis — income test and asset test assessments, look-through analysis for funds of funds, excess distribution calculation, election availability review, Form 8621 preparation, and streamlined submission coordination — as a single coordinated engagement that addresses historical non-compliance and establishes the going-forward annual compliance program simultaneously. We also coordinate the PFIC analysis with the UK offshore fund reporting to ensure that the combined US and UK effective rate is modeled correctly and the foreign tax credit is applied accurately.

Contact our team today to begin a confidential review of your hedge fund PFIC position. Email hello@us-uktax.com, call 0333-8807974, or visit https://www.us-uktax.com/contact/ to book a consultation.

Conclusion

Hedge fund investments create hidden PFIC exposure for UK-resident US citizens that accumulates silently over the years, with the excess distribution interest charge growing at the IRS underpayment rate for each year of the holding period — producing an effective US tax rate on the total gain that can exceed 60% by the time the investment is redeemed. Furthermore, the indefinite statute of limitations in years with missing Form 8621 filings means the IRS can assess the PFIC tax at any time, narrowing the window for cost-effective voluntary correction through streamlined procedures each year as FATCA data matching matures. Consequently, engaging US and UK tax accountants who understand both the US PFIC rules and the UK offshore fund regime is the only way to ensure that the combined tax cost of hedge fund investments is identified, managed, and correctly reported before it becomes a significantly larger problem than it needs to be.

The three most important actions for any UK-resident US citizen with hedge fund investments are: first, conduct a full PFIC analysis of every non-US fund holding — including indirect interests through fund of funds structures — and assess the election options before any redemption decision is made; second, regularise any missed Form 8621 filings through the streamlined procedures as soon as the gap is identified, before IRS contact removes the option; and third, assess the mark-to-market election eligibility for UCITS fund interests, since this election can be made prospectively to prevent further excess distribution regime accumulation even where the prior years cannot be corrected retroactively. Contact US-UK Tax at hello@us-uktax.com or call 0333-8807974 to begin a confidential PFIC review today.

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FAQs

Q: Why do Cayman hedge fund investments create PFIC exposure for US citizens?

Cayman feeder funds are foreign corporations whose income is predominantly passive — dividends, interest, and trading gains — and that meet the PFIC income test with 75%+ passive income. Every US investor holding such a fund has a PFIC interest requiring annual Form 8621 reporting.

Q: What is the excess distribution regime, and why is it so costly?

The default PFIC regime taxes gains on redemption at ordinary income rates plus an interest charge at the IRS underpayment rate for each prior year of the holding period. For a 7-year holding, the interest charge alone can add 20%+ to the effective US tax rate on the gain.

Q: Is a QEF election available for Cayman hedge fund interests?

Only if the fund provides a PFIC Annual Information Statement, most Cayman fund administrators do not prepare this as standard, so the QEF election is often unavailable unless specifically negotiated with the fund manager before investment.

Q: Can I use the mark-to-market election for an Irish UCITS fund?

Yes. Irish UCITS shares are listed on regulated markets and qualify as regularly traded for Section 1296 purposes. The mark-to-market election taxes the change in annual value as ordinary income and avoids the punitive interest charge of the default excess distribution regime.

Q: Does the UK offshore fund income tax fully offset the US PFIC liability?

Only partially. The foreign tax credit can offset UK income tax at 45% on a Cayman fund redemption. However, the PFIC interest charge is not an income tax and cannot be credited, leaving a residual uncreditable US charge in most cases.

Q: Must I file Form 8621 if I have not redeemed my hedge fund shares?

Yes, if you received an excess distribution or if you hold shares in a PFIC that exceeds the reporting threshold. The reporting threshold for annual filing is ownership of a PFIC with a value exceeding $25,000 (or $50,000 for joint filers) at year-end.

Q: What is the look-through rule for fund of funds PFIC investors?

Where a fund of funds holds 25% or more of the value of an underlying PFIC, the investor is treated as holding an indirect PFIC interest in the underlying fund. Each indirect PFIC interest requires a separate annual Form 8621 filing, significantly increasing the compliance burden.

Q: Can the streamlined procedures cover missed Form 8621 filings for hedge funds?

Yes. Form 8621 catch-up filings for PFIC interests can be included in the streamlined submission, along with missed income tax returns and FBARs. The 5% penalty on FBAR balances replaces the open-statute PFIC tax exposure for non-wilful investors meeting the foreign residency test.