UK: Offshore Fund Reporting Regime

Last Updated: 27 August 2013
Article by Kari Campbell, Colin Aylott and Tim Lyford

The current offshore fund reporting regime was introduced in 2009 to replace the distributing fund regime. As with its predecessor, the primary purpose of the offshore reporting fund regime is to remove scope for UK investors to roll up income in offshore funds with the intention of this being taxed as capital upon the eventual disposal of their investment.

Under the previous regime, the distributing fund regime, the fund was required to distribute a certain level of income, whereas the current regime is more flexible in that participating offshore funds have no such obligations imposed on them. Instead investors are taxed on income received by the fund throughout the duration of their investment, regardless of whether it is actually distributed, the upside then being that the true capital element of any gain arising on disposal is taxed as such. This is in contrast to the default position for non-participating funds where gains realised on disposal of investments will be taxed wholly as income.

Considerations for funds looking to join the regime

Any offshore fund that either has UK investors, or is looking to target the UK market, should consider the benefits associated with obtaining reporting fund status if they have not already taken such steps. As described above, reporting fund status secures capital treatment on gains realised by investors. Given that the maximum capital gains tax rate is currently 28% compared to the maximum income tax rate of 45% from April 2013, this is likely to appeal to prospective and current investors alike.

Before making an application, funds obviously need to consider the administrative costs associated with participation in the regime, and in some instances where UK investment is minimal, it might not necessarily represent the best option. Equally, where funds roll up income and do not distribute income, this will result in investors effectively being taxed on income not yet received. In such instances, reporting fund status may not be appropriate given the potential cash flow burden imposed on investors.

Funds participating in the regime

Funds that have obtained reporting fund status are obliged to comply with a number of reporting requirements. In most cases, the fund's reporting will be synchronised with its year end. The legislation is complex, and there are many issues that need to be considered as part of the reporting process, however, a fund's reporting obligations can be broadly summarised as follows.

  • Ensure that accounts are prepared in accordance with IAS, or where the local GAAP do not correspond, provide details and supporting computations to HMRC of how equivalent values are arrived at.
  • Provide HMRC with a computation of reportable income for each reporting period.

The computation of reportable income requires the adjustment of the fund's total comprehensive income (or equivalent value) to remove items deemed to be capital in nature by the relevant UK legislation. In many instances there will also be additional requirements to adjust for other items, most significantly equalisation, interests in other investment funds and giving effect to the 'effective interest method' (a form of bond amortisation under IAS). It is the reportable income figure (allotted on a per share basis), less income already distributed, that UK investors are ultimately taxed on.

The computation of reportable income must be submitted, along with supplementary documents and declarations, to HMRC within six months of the reporting period end.

Provide a corresponding report to UK investors of the fund's reportable income

A report must be provided to every UK investor capturing the information deemed necessary by the relevant legislative provisions for the investor to prepare their tax return (whether that be personal or corporate). Although a fund need not provide investors with a copy of the underlying computations, details should be provided in respect of reportable income, actual distributions made in the period and, depending on the elections made by the fund in the application process, equalisation. The report must be made available to all UK investors, although the fund is not necessarily required to physically distribute individual copies of the report to each investor. For instance, making the information available on the fund's website will suffice. The six month deadline in place for submission of documents to HMRC also applies. A copy of the report made available to UK investors must be provided to HMRC.

How to apply for reporting fund status

New and existing funds wishing to make an application to join the regime must apply to HMRC by the later of the end of the accounting period for which they intend for reporting status apply and three months after interests in the fund were made available to UK resident investors. There is a formal application process whereby funds must provide supporting financial documentation to HMRC (namely a copy of its prospectus), along with statements regarding the intentions of the fund in respect of accounting policy and equalisation methods to be employed.

Only investment funds falling within the UK statutory definition of 'offshore fund' are eligible to make an application to join the regime. The definition has been broadened in recent years, although any funds that are not mutual funds are automatically precluded from entry.

We can help

The reporting fund regime offers a degree of flexibility to participating funds in the operation of their distribution policy, whilst acting to secure the separation of income and capital from a taxation perspective for UK investors.

At Smith & Williamson we are perfectly positioned to offer a holistic range of taxation services to offshore funds wishing to participate in the regime. From initial reviews of eligibility and preparing applications, to completing annual reporting documents and dealing with any ad-hoc queries, our team of experienced individuals, who have acted for a number of funds since the inception of the regime, are able to assist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions