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HMRC internal manual

Offshore Funds Manual

Reporting funds: Computation of reportable income: Equalisation: Equalisation amounts not treated as distributions

Where a participant acquires an interest in an offshore reporting fund that operates full equalisation arrangements by way of initial purchase in a reporting period the regulations allow:

  1. The amount of any excess of reportable income over distributions to be reduced by the equalisation amount, and
  2. The amount of any actual distributions to the participant in respect of the reporting period to be reduced by the amount, if any, by which the equalisation amount exceeds the excess.

However the amount of reportable income (1) or actual distributions (2) shall not be reduced below nil.

Where the reportable income in the period is reduced by the equalisation amount, the expenditure given for the acquisition of the asset is treated as reduced by the same amount in any subsequent disposal computation.