Personal Tax: Offshore reporting funds and 'Excess Reportable Income'

An offshore fund is an investment fund located outside of the UK. It may be registered with HMRC as a 'reporting' fund and the tax treatment of your investment depends on whether it is so registered. HMRC maintain a list of those funds which have registered here.

This note summarises the high-level tax position for the reporting and non-reporting fund investors, please do speak to us if you would like specific advice.

Distributions received

If you receive an interest or dividend payment from an offshore fund (irrespective of whether it is a reporting or non-reporting fund) this is taxable in the normal way and should be included within the foreign income pages of your tax return.

Reporting funds

Reporting offshore funds are required to publish details of income which has arisen to the fund in the year and note that which has been distributed to investors and that which has not been distributed. This undistributed income is referred to as "excess reportable income" or 'ERI'.

Investors in reporting funds are taxable on their share of the excess reportable income arising annually, even though they have not received these amounts. The payments are subject to income tax and included as interest/dividends based on the holdings in the fund.

The fund will publish the following details to enable investors to calculate their share of ERI arising:

• The amount of undistributed income / excess reportable income per unit,  so that the investor can multiply this by their unit holding at the relevant year-end.
• The financial reporting year-end for the investment fund.
• The deemed distribution date of the ERI.
• This is usually, but not always, six months after the fund's year-end and determines the tax year in which you must report the excess reportable income.

For example:  If the year-end is 31 December 2024, the investor will calculate their share of the ERI arising by multiplying the figure provided by their unitholding at this date. If the deemed distribution date is six months later on 30 June 2025, their ERI will be included on their tax return for the 2025/26 tax year.

When an investor sells their units in a reporting offshore fund, any gain arising will be subject to capital gains tax. In calculating the gain arising, a deduction can be taken for any ERI which arose during the period in which the investor owned the units.

Your financial adviser or investment broker may be able to provide details of the reporting status of your investments and confirmation of any amounts of excess reportable income to be included in your tax return.  These details are often included on their tax reports.

Non-reporting funds

A non-reporting offshore fund is a fund that has not obtained reporting status from HMRC and thus, does not publish details of its income arising and not distributed.

Income from a non-reporting fund is only taxable when distributed to you. This means there is no non-reporting equivalent of ERI. However, if you dispose of units in a non-reporting offshore fund and realise a gain, this will be treated as an 'offshore income gain' and subject to income tax, rather than capital gains tax.

For more information, please contact us at tax@corrigan.co.uk.