IFM14266 - Taxation of investment trusts: Interests in offshore non-reporting funds: index tracking funds

Where an investment trust disposes of an interest in an offshore fund which is a non-reporting index tracking fund, regulation 45 of SI 2011/2999 disapplies regulation 17 of the offshore funds tax regulations (SI 2009/3001). That is, no offshore income gain will arise on the disposal of non-reporting index tracking fund by the investment trust provided specific conditions are met.

The conditions, which must apply from the date the non-reporting fund was acquired to the date the non-reporting fund was disposed, are that:

  • In accordance with the instrument constituting the investment trust, the aim of the investment trust’s policy is to replicate the performance of a qualifying index;
  • The main purpose of the investment in the non-reporting fund is to represent the composition of the qualifying index; and
  • The capital and income returns of the investment trust replicate as closely as practicable the returns of the investment comprised in the qualifying index.

An index is a “Qualifying index” if it is based on the value of securities listed on a recognised stock exchange or admitted to trading on a regulated market and either a competent authority for the United Kingdom or an authority responsible for regulating offshore funds recognises the index on the basis that:

  1. Its composition is sufficiently diverse,
  2. It represents an adequate benchmark for the market to which it refers,
  3. It is published in such a way that it is widely available, and

It is calculated and published by a body which is managed independently from the management of the investment trust.