IFM13322 | Offshore Funds: participants in offshore funds: participants within the charge to income tax: reporting funds: income and distributions: other non-corporate offshore funds

Regulation 96 – other non-corporate offshore funds of SI 2009/3001

Arrangements that are non-transparent for income purposes and that come within the definition of an offshore fund under section S355(1) TIOPA 2010 (that is, funds that do not take corporate form) will be foreign unit trusts. Foreign unit trusts that are not transparent for income purposes are sometimes referred to as ‘Garland’ unit trusts.

UK investors in foreign unit trusts that are non-transparent for income purposes are taxable on their proportionate share of income (as ascertained after the trustees have met the expenses of administering the trust) when it is indefeasibly allocated to them, regardless of whether the income is paid to them or is accumulated. Unlike the position for transparent unit trusts, that income is taxable as miscellaneous foreign income (under Chapter 8 of Part 5 of ITTOIA 2005) and the tax rates applying will be those applying to such income.

If there is an excess of reported income over the amount allocated (for example if the unit trust has invested in another reporting fund and has itself received reports of income which was not actually distributed to it) then the excess must be treated by the participant in the same way as the allocated income (that is as miscellaneous foreign income (under Chapter 8 of Part 5 of ITTOIA 2005).