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HMRC internal manual

Offshore Funds Manual

Reporting funds: application for reporting fund status: contents of application - Regulation 53

Applications must include all of the following -

  1. a statement showing the first period of account for which it is intended the fund should be a reporting fund;
  2. an undertaking that the fund will not have any periods of account exceeding 18 months;
  3. a statement of whether the fund intends to use International Accounting Standards (IAS) in the preparation of its accounts or, where it does not, a statement of which generally accepted accounting practice it intends to use;
  4. where a fund does not intend to prepare its accounts in accordance with IAS, a statement specifying where in the fund’s accounts the figure which it considers to equate to ‘total comprehensive income for the period’ can be found (see OFM14150 for an explanation of what is meant by ‘total comprehensive income for the period’); and also
  5. a statement specifying how the fund intends to comply with regulation 66(1)(b) (effective interest income or comparable amounts) and to calculate the adjustment required by regulation 66(2) (see OFM24510);
  6. an undertaking to meet the requirements relating to reports to participants in the fund;
  7. an undertaking to meet the requirements relating to the provision of information to HMRC.
  8. a statement of whether or not the fund intends to operate equalisation arrangements (see OFM24620).
  9. in a case in which the fund does intend to operate equalisation arrangements, a statement whether or not the fund intends to operate full equalisation arrangements (see OFM24630)
  10. in a case in which the fund does not intend to operate equalisation arrangements, a statement specifying whether the fund intends to make income adjustments in a reporting period.
  11. in a case in which the fund intends to make income adjustments in a reporting period, a statement specifying whether those adjustments will be made on the basis of reported income (see OFM24670) or accounting income (see OFM24680) and the length of the computation period.
  12. In a case where the fund intends to make income adjustments on the basis of accounting income such statements as outlined in OFM24680

In addition, applications for existing funds must be accompanied by the fund prospectus or, where the application is for an anticipated fund, the proposed prospectus. Documents provided must either be in English or be accompanied by an English translation. Where a fund provides both ‘short’ and ‘long’ prospectuses to potential investors, regulatory requirements dictate that the short version must be translated before the fund in question can market to UK investors, but the long version is not usually translated. Provided that the short version contains all of the relevant details that an investor would rely on before deciding whether to invest (so, for example, the structure of the fund, its investment strategy, its tax status, etc.) then HMRC would not also require a translation of the long version.

In respect of items (d) and (e) above, a ‘future fund’ applying under regulation 51(2) may have established the GAAP it will use but not yet have identified what entries in its accounts will equate to total comprehensive income, or how it will comply with regulation 66 (effective interest income or comparable amounts). If that is the case, an application may still be made but the person applying should explain the position in the notes space of the application form (see below). HMRC are unable to approve a fund as a reporting fund until all of the items required by regulation 53 have been provided. Where the information for (d) and (e) is to be provided at a later date, HMRC will write to request that information under regulation 55(1)(c) and agree the time to be allowed for a response with the applicant, which must in any case be before the end of the first period for which reporting fund status is required. HMRC will state whether the application would be accepted in respect of the other requirements of regulation 53, but the fund should not represent itself as having been accepted as a reporting fund and will not be listed by HMRC as a reporting fund until the application is complete.

Where the fund applying for reporting fund status is part of an umbrella arrangement or constitutes a class of interest then the documents must relate to the entity which includes the fund.

A pro-forma application form and checklist is available on HMRC’s website - see OFM21400 for a link.

Once an application for a future fund has been approved by HMRC, there may be a delay in the fund receiving subscriptions from investors. Where that remains the case before the end of a fund’s first or subsequent accounting periods it is recommended that the manager sends a ‘nil’ return to HMRC for each reporting period in order to ensure that there is no breach of regulation 112 (‘cases where information is not provided’).