What are non reporting funds?

Non-Reporting funds have no obligation to report the accumulated income to HMRC. This is because, should a loss be realised on the disposal of units, the proceeds can be remitted to the UK free of tax, since the income will have been segregated.

How is a non reporting fund taxed?

UK investors holding non-reporting funds are only charged income tax on the distributions that the fund actually makes to them. However, the income is taxed as miscellaneous income and not as dividend, interest or savings income. The implication of this are that capital gains tax reliefs and rates won’t apply.

What is a reporting fund?

The UK’s tax reporting regime for offshore funds, known as UK Reporting Fund Status (UK RFS), can dramatically reduce a UK investor’s tax bill. The UK tax authority, HMRC, maintains a public list of registered funds, so investors can screen out non-reporting funds before they invest.

How is Eri taxed?

Income received by a reporting fund but not distributed to the investor is called Excess Reportable Income (ERI). The investor is liable to income tax on ERI accrued. It is their responsibility to report ERI on their tax return and pay any tax that may be due.

What is the difference between reporting and non-reporting funds?

From a tax point of view, income of a non-reporting fund rolls up without tax being due, whereas income of a reporting fund is reportable and taxable annually as it arises. On disposal, any profit on a reporting fund is treated as a capital gain, and profits on non-reporting funds are treated as income.

Does Equalisation go on tax return?

The equalisation payment is not treated as taxable income – it is a return of the investor’s capital and will reduce the amount invested for the purposes of capital gains tax (CGT).

Who invests in offshore funds?

Offshore mutual funds are investment securities offered by investment companies headquartered outside the U.S. These funds are typically used by non-U.S. investors, U.S. tax-exempt entities, and hedge funds.

What is Cayman funds?

The Cayman Islands is the leading domicile for investment funds, attracting 80% of all new offshore fund formations. Cayman is estimated to house more than 75% of the world’s offshore hedge funds and nearly half of the industry’s estimated US$1.1 trillion of assets under management.

What is the difference between reporting funds and nonreporting funds?

Any fund which does not have Reporting Fund status is by default a NonReporting Fund. Reporting Funds are obliged to report details of their income to their UK resident investors and to HMRC, whether or not such income has actually been distributed to participators.

What are non reporting capital gains and losses?

Non-Reporting funds Capital gains and losses must be separated. The gains are treated as “ordinary gains” and losses remain as capital losses and they cannot offset one another. The annual exemption cannot be used to reduce the ordinary gain.

Is it possible for a fund to lose reporting status?

It’s entirely possible for a fund to lose its reporting status, though not as likely as it used to be when distributor status was the only option. As HMRC say, in their highly entertaining 209-page manual:

What happens if my assets are non-reporting/non-distributing?

If the funds are non-reporting / non-distributing but are safely tucked up in an ISA or pension then you can breathe a sigh of relief. Your assets are off the tax radar as far as Her Majesty’s Revenue & Customs (HMRC) is concerned.