Offshore funds - transparent funds

An outline of the regime applying to offshore funds is discussed in the Offshore funds guidance note, and you are advised to read that guidance note first. It also explains what is meant by ‘reporting’ and ‘non-reporting’ funds.

Reporting funds can be divided into ‘opaque’ funds (also known as non-transparent funds), where investors are regarded as owning units in the fund rather than as owning precise fractions of the underlying assets, and ‘transparent’ funds, where the investor has a share of the underlying fund assets.

The fund manager should be able to tell the taxpayer whether the fund is opaque or transparent for tax purposes.

This guidance note considers the tax treatment of transparent funds, both reporting and non-reporting, for the UK resident individual investor. For the tax treatment of opaque funds, see the Offshore funds - opaque funds guidance note. For what happens when a fund changes from being reporting to non-reporting, or vice versa, see the Offshore funds - change of status guidance note.

The taxation of offshore funds is very complex. This note is only an outline of the topic, and you may need specialist advice. In particular, there are complexities where one offshore fund invests in another, has an ‘umbrella’ structure involving sub-funds, or where trusts are involved.

For further reading see Simon’s Taxes Division B5.7 (subscription sensitive).