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20 January 2010
Investors face similar treatment as with direct investment
The Financial Services Authority (FSA) plans to introduce updated regulations for the funds of alternative investment funds (FAIFs) regime soon.
The Government has been working closely with the FSA to develop draft regulations for the tax regime, being concerned with whether investments are made by authorised investment funds (AIFs) into non-reporting offshore funds.
To make this distinction, the draft tax regulations refer to funds investing in non-reporting funds (FINROFs).
Features of the FINROF tax regime include:
- It applies automatically to AIFs that invest more than 20% of the value of the fund’s assets in non-reporting offshore funds.
- The point of taxation is moved away from the AIF to the investors, with the result that the UK investors would face similar tax treatment as they would have had they invested into the underlying non-reporting offshore funds directly.
- Funds can elect into the regime even if they do not fall within the definition of a FINROF.
- Investors can elect for deemed disposal of their investment on entry into the FINROF regime.
Full details of the consultation can be found here.
