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HMRC internal manual

Offshore Funds Manual

From
HM Revenue & Customs
Updated
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Reporting funds: transactions not treated as trading: Investment Manager Exemption (IME)

Regulation 80(2), which confirms that certain transactions are treated as non-trading transactions, applies only for the purposes of Chapter 5 of the regulations; that is for the purposes of computing an offshore fund’s reportable income in order to establish the UK tax position of participants in the fund.

The regulations are made under powers enabling provision to be made about the tax treatment of participants in an offshore fund and they should be read in that context. Specifically, the regulations do not make or purport to make rules that affect the taxation of any of the funds referred to therein as ‘offshore funds’; only to regulate the taxation of the returns from those funds to persons taxable under UK legislation. Funds that are taxable in the UK are dealt with by other legislation.

It is a question of fact whether or not, for the purposes of that other legislation, a non-resident fund is carrying on a trade in the UK. Where such a fund is carrying on a trade in the UK through an investment manager operating here, the protection of the Investment Manager Exemption may be available in relation to any ‘investment transaction’ specified in the Investment Manager (Specified Transaction) Regulations 2009.

Guidance on the Investment Manager Exemption can be found in the International Manual on the HMRC website.