Offshore funds with a December year end have until 31 December 2015 to apply to HM Revenue & Customs (HMRC) for reporting fund status (RFS). UK investors will benefit from this status for 2015 and future years.
The advantages to an offshore fund acquiring RFS are:
- UK resident investors in an offshore fund pay income tax on disposal of their investment. If the offshore fund has RFS, the UK investor will access capital gains tax treatment on disposal;
- Having RFS can make your offshore fund easier to distribute and market being more attractive than offshore funds without this status;
- RFS is beneficial for management share classes or share classes into which deferral has been invested for UK resident participants; and
- The changes to non-dom regime mean that RFS will become more attractive to this class of investor who previously could have kept gains on disposals of offshore funds outside the UK tax net but may in the future be taxable to gains in the UK.
RFS doesn’t suit all fund strategies but we can help you determine if it would be beneficial for the offshore funds you manage.
If your offshore fund already has RFS but has issued new share classes during the year these must be registered with HMRC before 31 December 2015. Equally if share classes with RFS have ceased to require RFS HMRC must be notified in advance of you wishing you to leave the regime, noting that compliance with the regime must be maintained up until the exit of the investor for them to benefit.