This news update provides an update about the Offshore Funds (Tax) (Amendment) Regulations 2009 (SI 2009/3139), made on 1 December 2009.

The amendment regulations

On 1 December 2009, the Offshore Funds (Tax) (Amendment) Regulations 2009 (SI 2009/3139) (the amendment regulations) were made. The amendment regulations, which come into force on 22 December 2009 but take effect retrospectively from 1 December 2009, amend the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001) (the main regulations). The changes reflect the revisions announced by HMRC on 27 November 2009.

Applying for reporting fund status

Any offshore fund other than a “guaranteed return fund” can apply to be a reporting fund. The form and timing of the application are set out in regulation 54 of the main regulations. The time for submitting the application has been extended by the amendment regulations so that the application must be made, broadly, within three months from the date on which the fund is launched in the UK.

Tax treatment of participants

Participators in reporting funds that are transparent are treated as receiving additional income to the extent that reported income of the fund exceeds the actual income of the fund. However, the amendment regulations insert a new provision in the main regulations, which ensures that the excess income is exempt from income tax to the extent that the participant’s rights in the fund were acquired before 1 December 2009 (or after that date but pursuant to an unconditional agreement entered into, or an agreement that became unconditional, before 30 April 2009 that is not subsequently varied).

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