Offshore funds—non-reporting offshore funds
Produced in partnership with Michael Alliston of Herbert Smith Freehills LLP
Offshore funds—non-reporting offshore funds

The following Tax guidance note Produced in partnership with Michael Alliston of Herbert Smith Freehills LLP provides comprehensive and up to date legal information covering:

  • Offshore funds—non-reporting offshore funds
  • The charge to tax
  • Scope of charge to tax and specific exclusions
  • Computation of OIG
  • Exceptions from the charge to tax
  • Exception: loan relationships and derivative contracts etc
  • Exception: trading stock
  • Exception: long term insurance funds
  • Exception: non-participating loans
  • Exception: interests in certain transparent funds
  • more

A 'non-reporting offshore fund' is any fund falling within the definition of an offshore fund within section 355(1) of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) which does not have reporting status for a particular period of account. The tax aggregation rules relating to non-reporting offshore funds are contained in the Offshore Funds (Tax) Regulations 2009, SI 2009/3001 (referred to, in this note, as the Offshore Funds Regulations).

For more on the eligibility criteria, and on the application process and related obligations for an offshore fund to obtain reporting status, see Practice Note: Reporting offshore funds—application and entry.

A non-reporting offshore fund has no obligations to HMRC for UK tax purposes, but it still has to meet its normal obligations to its own investors, and UK investors in such funds are responsible for ensuring that they make correct returns of any income gains received from their investment.

The significance for UK investors with investments in offshore non-reporting funds is that, on disposal of their main interests, they will be liable to tax on income on any gains arising (as opposed to tax on chargeable gains), subject to certain exceptions.

For the computation of any offshore income gain (OIG) see the main section: Computation of OIG below.

The charge to tax

The Offshore Funds Regulations state that a charge to tax will