New queries, issue 4454

Undistributed income

Can work and time spent tracking offshore undistributed income be minimised?

The Offshore Funds (Tax) Regulations SI 2009/3001 placed a heavy burden on investors in offshore funds with reporting status. Investment managers often seem to avoid reporting excess undistributed income from such funds in their annual tax packs because the fund managers’ responsibility under the regulations is to report to “participants” ie the underlying investors and not to their nominees.

Consequently many brokers specifically exclude any such chargeable income. As well as leading to potentially incorrect tax returns this means that any capital gains computations by the investment manager are likely to be incorrect.

The reports that the fund managers are obliged to provide are not personalised; the requirement is merely to make available (perhaps on a website or in a newspaper) details of excess reportable income per unit for each fund.