Fund Equalisation Arrangements - Have You Made Your Notification?

As of 27 May 2012, all funds that are currently part of the UK Offshore Funds Reporting regime are obligated to confirm with the UK tax authorities (HMRC) their intended equalisation arrangements.

Failure to inform HMRC of their preference will result in the fund being treated as not operating equalisation arrangements and the fund manager will be obliged to make equalisation adjustments based on reported income.

This obligation arises from the amendments made to the Offshore Funds (Tax) Regulations in May 2011 that addressed flaws in the original legislation which, by general consensus, failed to properly deal with the issue of equalisation and its effect on both participants and fund administrative procedures. The amendments have introduced a range of different options available to reporting funds relating to the way in which they deal with equalisation from a tax reporting perspective.