IFM12538 - Offshore Funds: Reporting funds: computation of reportable income: adjustments for special classes of income: from non-reporting funds

Regulations 69 and 70 of SI 2009/3001

Non-reporting fund holdings with full information - regulation 69

A reporting fund (‘RF’) may have an interest in one or more non-reporting funds (‘NRF’). Where that is the case and all of the conditions set out in regulation 69 apply then RF may carry out its own calculation of the reportable income for NRF and take this into account in calculating its own reportable income.

It is then able to treat its interest in NRF as an interest in a reporting fund for the purposes of its own calculation of reportable income and regulation 68 (See IFM12536), applying to interests of reporting funds in other reporting funds, will apply accordingly.

Income from other non-reporting funds - regulation 70

Where any of the conditions in regulation 69 are not met, then no adjustments may be made. The effect of this will be that the starting figure which reflects total return will remain unadjusted in respect of RF’s interest in NRF, so that the full amount of the total return (or fair value increase) in NRF will be reflected in reported income.

This also applies if the conditions in regulation 69 have been met in earlier periods but are no longer met (regulation 71). Regulation 70 will then apply in any later periods of account in respect of an interest in the non-reporting fund in question (regulation 71(2)).

Where the fair value of RF’s interest in NRF decreases, so as to produce a loss such a loss may be:

  • carried forward to later periods of account to set against any fair value gains made on the interest in that NRF only, or
  • used to reduce the income of the RF for the period in which they were incurred, or
  • used to reduce the gains arising to the NRF.

This is subject to the condition that RF must have been a reporting fund for all periods in which such losses are made. Losses may only be used once, and they may not be set-off to the extent that they have been used to reduce income for the period of account in which they were incurred.