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HMRC internal manual

Offshore Funds Manual

Reporting funds: computation of reportable income: Equalisation: Information to be provided in report to participants

In addition to the basic information to be provided in a report to participants (see OFM26200), the 2011 regulations prescribe that the following additional information must be provided in the contents of that report in relation to equalisation.

Reporting fund operating full equalisation arrangements

Where a reporting fund operates equalisation arrangements the reported income per unit of a reporting fund is computed by dividing the reported income of the fund by the number of units in the fund at the end of the reporting period.

Where a fund operates full equalisation and has not given a statement to the participant of the equalisation amount relating to the initial purchase of units in the reporting period (Regulation 50A b(i)) the report to participants must contain this information (Regulation 92 (1)(f).

Reporting fund not operating full equalisation arrangements

Where a reporting fund operates equalisation arrangements the reported income per unit of a reporting fund is computed by dividing the reported income of the fund by the number of units in the fund at the end of the reporting period.

Such a fund will not report anything to participants in respect of equalisation.

Reporting fund does not operate equalisation arrangements and does not make income adjustments

Where a reporting fund does not operate equalisation arrangements and does not make income adjustments, the reported income per unit of a reporting fund is computed by dividing the reported income of the fund by the number of units in the fund at the end of the reporting period.

Such a fund will not report anything to participants in respect of equalisation.

Reporting fund does not operate equalisation arrangements and does make adjustments on basis of reported income

In a case where a reporting fund does not operate equalisation arrangements and does make adjustments on the basis of reported income, the reported income per unit is determined in accordance with Regulation 92A(2) (see OFM24670).

Reporting fund that does not operate equalisation arrangements and does make adjustments on basis of accounting income

In a case where a reporting fund does not operate equalisation arrangements and does make adjustments on the basis of accounting income, the reported income per unit is determined in accordance with Regulation 92B(2) (see OFM24680).

Computation of equalisation amount per unit of interest in the fund

The fund may choose to calculate the equalisation amount per unit of interest in the fund on either the basis of:

  • The sum of all equalisation amounts in relation to all acquisitions by way of initial purchase in the reporting period divided by the total number of units acquired by way of initial purchase in the period, or
  • The equalisation amount in relation to the acquisition by the participant to whom the report is made (under regulation 92) divided by the number of units acquired on that acquisition.

This is subject to 2 exceptions:

  1. A reporting fund cannot change the basis for calculating the equalisation amount per unit of interest in the fund more than once in three successive reporting periods.
  2. In a reporting period all reports to participants must use the same basis for calculating the equalisation amount per unit of the fund.