IFM02410 - Funds Investing in Non-Reporting Offshore Funds (FINROF): Introduction

In early 2010 the then Financial Services Authority changed its rules to allow authorised investment funds (AIFs) to invest in a wider range of offshore funds, including non-reporting offshore funds.

At the same time a new tax regime for Funds Investing in Non-Reporting Offshore Funds (FINROF) was introduced – Part 6A of the Authorised Investment Fund (Tax) Regulations 2006 (SI 2006/964). The purpose of the regime is to move the point of taxation on gains to the investor so that institutional and tax exempt investors in certain funds would not be disadvantaged compared with similar investors in offshore funds, while individuals are taxed on gains as offshore income gains in the usual way.

Regulations 14ZA to 14ZC of SI 2006/964 were subsequently added to clarify how investments in offshore funds held by AIFs should be taxed – see IFM02250.

The following pages outline the FINROF regime.