Reporting funds: computation of reportable income: adjustments for special classes of income: income from wholly-owned subsidiaries - regulation 67
A wholly owned subsidiary, for the purposes of the offshore funds regulations, means a company where the whole of the issued share capital (subject to the paragraph below) is directly or indirectly owned by a fund falling within the definition of an offshore fund, or by the trustees of such a fund for the benefit of the fund, or where it is owned in such a manner that it near as possible corresponds to either of those categories.
If a company has only one class of issued share capital, then reference to ‘the whole of the issued share capital’ means a reference to at least 95 per cent of the share capital.
In any case where any of the conditions above apply, the consequences are that the receipts, expenditure, assets and liabilities of the subsidiary are to be regarded as arising to the fund itself (subject to apportionment where the funds interest in the subsidiary company is less than 100% - regulation 67(4)).
The fund should then, in all other respects, ignore its interest in that company, including any distributions or other payments made to it by the subsidiary.
Additionally, any adjustments to the treatment of capital items required by regulations 64 and 65 must be made to the amounts treated as arising to the fund.
If the accounts of the subsidiary are consolidated into those of the fund then no adjustment should be needed in respect of this regulation as the consolidation will have achieved the required result.