IFM12300 - Offshore Funds: introduction: non-reporting funds

Overview

A non-reporting fund is any offshore fund that does not have reporting fund status for a particular period of account. It is possible for a reporting fund to become a non-reporting fund, and vice versa. It is possible that a fund may previously have been a reporting fund and subsequently became a non-reporting fund, or vice versa.

Whilst a reporting fund has certain obligations to HMRC and to its investors, a non-reporting fund has no such obligations for UK tax purposes. The non-reporting fund will still have to meet its normal obligations to its investors. UK investors are responsible for ensuring that they make correct returns of any income or gains received from their investment.

Offshore income gains (‘OIGs’)

The main effect for UK investors who have invested in non-reporting funds, as opposed to reporting funds, is that on disposal of their interests they will be liable to tax on any gain arising as if it were income (that is, an offshore income gain, or ‘OIG’) instead of as a capital gain. There are certain exceptions to this - see IFM13400 onwards.

For guidance as to what happens when a reporting fund becomes a non-reporting fund, and vice versa, see IFM13250 and IFM13350 onwards and IFM13270 and IFM13370 onwards respectively.

Guidance for investors in non-reporting offshore funds

Part 2 of the Regulations is solely concerned with the treatment of ‘participants’ (that is, UK investors) in non-reporting funds and the guidance at IFM13200 onwards and IFM13300 onwards explains the effect of the regulations.