UK Reporting Funds

Offshore Fund reporting

If you plan to market your offshore Fund to UK investors, then this is relevant to you.

UK individuals would prefer to pay tax at UK capital gains tax rates (generally 20%) rather than income tax rates (up to 45%).

To ensure a Fund can offer UK investors this comfort then the Fund must have Reporting Fund Status (RFS) (with such funds often referred to as ‘Reporting Funds’). UK investors can then pay UK capital gains tax rates on any disposals, providing they pay income tax on their share of any income in the Fund, even if this income is not paid out.

There are a few hoops to jump through to get a Fund registered for RFS, as well as ongoing compliance requirements but given the value RFS provides then these are obstacles worth tackling.

Registration

Registering for RFS is straight forward. An application form, which asks questions about the Fund, would need to be completed and submitted to HMRC alongside other documents for example the Fund’s prospectus.

The application must be made before the end of the accounting period for which the Fund requires RFS eg. for a 31 December 2022 year end, the application must be submitted by 31 December 2022.

A similar application will also be required for any share classes that require RFS that are launched later.

Compliance

Once the initial application has been made, the Fund must provide annual reporting to HMRC and its investors within 6 months of its year end eg. for 31 December 2022, reporting is due before 30 June 2023.

This report will include a calculation of the Fund’s Excess Reportable Income (ERI) on a share class by share class basis. ERI is essentially the income in the Fund that has not been distributed and UK investors need this figure to include on their tax return.

A timeline of the relevant dates and requirements is shown below.

 

Top tips

  • Don’t miss the deadline! HMRC will not take late applications and it is no fun explaining to UK investors that they will pay income tax on some of their ‘investment’
  • Although the initial application can include all share classes, any new share classes must be registered separately if RFS is required. Don’t miss this deadline either!

 

How we can help you

We can help Funds to obtain RFS and undertake the annual reporting. 

This document is designed to give a high-level overview of RFS however we are on hand to help with the more technical aspects of this regime. Advising on:

  • Whether a Fund meets the definition of an ‘Offshore Fund’
  • Bond Funds and how income streams may differ when UK investors invest in these vehicles
  • Corporate considerations of investing into an offshore Fund eg. how a UK corporate investor will be taxed depending on whether the Fund has RFS or not
  • Fund of Funds and computational requirements
  • Converting a non-reporting Fund into a Reporting Fund and advising on relevant UK investor elections to ensure that any uplift moving forward can be taxed at capital gains tax rates
  • How to reflect the mechanics of this regime in a Fund’s prospectus when marketing the Fund

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • Her Majesty Queen Elizabeth II
  • Referees’ tax: entering extra time
  • FRC reviews EPS
  • HMRC hails 4,000 taxi drivers
  • Scotland announces rent freeze
  • FRC researches the PIE audit market
  • Mini Budget expected this week
  • And finally…Companies House encouraging
    online filing

Click the button below to download this week’s edition, or read our previous editions here.

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • Prospects of a September Budget?
  • Fuel advisory rates increase
  • Companies House to extend web filing
  • OTS reviewing working practices
  • ICAEW finds business confidence falling
  • MTD guidance issued
  • Naming and shaming tax avoiders
  • And finally… send accountants to jail

Click the button below to download this week’s edition, or read our previous editions here.

Recruitment & Onboarding Coordinator

The role
Supporting the Talent Acquisition Manager with all aspects of attraction, interviewing and
onboarding of new staff:

1. Recruitment
• Ensure vacancy list is always up to date in all appropriate places, including internal People data
• Ensure Job Descriptions are listed in the appropriate places, internally and externally, and removed as appropriate
• Support Talent Acquisition Manager with agency liaison, ensuring they have all necessary information at all times
• Monitor the Recruitment Inbox, responding to applications (reject/filled vacancies) and ensuring a positive experience for all interested applicants
• Monitor the HR Inbox with the Team Administrator to ensure all queries are managed effectively, many of which will be from joiners
• Manage recruitment tracker/log, saving CVs and keeping up to date with developments
• Manage the interview process i.e. schedule interviews, book rooms/Teams meetings
ensuring all parties have all relevant information in good time
• Ensure all invoices are received, collated, logged and sent to Finance within appropriate timeframe
• Hold any initial screening calls with candidates as and when requested and feedback in the appropriate timeframe.
• Liaise with external agencies to ensure a positive candidate experience for all areas of the process.

2. Offer Process
• When appropriate, create the contracts of employment and offer letter within agreed SLA for approval via internal channels
• On approval, send out contract and letter with all appropriate documentation and liaise with candidate if there are questions arising
• On receipt of acceptance letter inform Hiring Manager and People Team of acceptance and commence on-boarding process

3. Onboarding
• Ensure a Welcome Pack is ordered for every new joiner ahead of their start date
• Ensure future employees receive all relevant onboarding documentation and manage subsequent return of information in good time
• Initiate and manage the new joiner referencing process keeping People Team informed of any issues
• Set up individual induction schedule with Hiring Manager, ensuring all specifically appropriate for the joiner
• Liaise with all internal teams as needed to ensure Day One runs smoothly, meetings are diarised, etc
• Meet joiners on Day One in advance of formal induction, on Teams or in person, to check all is well

4. Joiner Administration
• Input new joiners onto Open HR and set up a personnel file for the individual
• Ensure all relevant IT equipment is ordered and organised for Day/Week One
• File all documentation into the individual personnel file for future reference
• Manage the Joiner & Leaver spreadsheet for internal use
• Input new joiners onto the Astute E-Learning platform and register them for the mandatory learning modules.
• Calculate holiday entitlements for new joiners
• Complete and circulate weekly ‘Starter & Leaver’ schedule for the Firm
• Ensure Team Data is inputted and kept updated for relevant departments
• Include joiners skills and specialisms into OpenHR upon starting
• Support the People Operations Manager with the People section of the new joiner Induction
• Manage the quarterly Induction for new joiners
• Attend regular meetings with the IT Department to ensure communication of new joiners is kept up to date

5. Compensation and Benefits
• Maintaining the Firm’s benefit platform and healthcare cashplan, monitoring starters.
• Ensuring key benefit changes or updates are circulated to all staff and actioning queries where necessary.
• Ensure new joiner details are updated in OpenHR and run monthly joiner payroll report for the People Operations Manager
• Supporting other team members on the annual salary review and trainee regrading, running reports and importing to the database, notifying relevant departments such as IT and updating payroll.

6. Data reporting
• Support team members in collating the People Dashboard report weekly including new joiners, graduates, turnover & retention data
• Create regular reports on recruitment to include various points of recruitment process (e.g. numbers of CV’s submitted, offer to acceptance ratio)
• Support Talent Acquisition Manager with salary benchmark data
• Support the People Operations Manager with data requests and ensure the data in OpenHR is kept up to date at all times.

7. Idea Generation
At all times, your ideas will be welcome as to how we can improve, be more efficient, save time, enhance compliance etc. so please listen, research and share ideas as you wish. Laws change,
market practices develop, and generations want different things so keeping an eye out for interesting developments is very wise and ever so useful.

You will have:
• Experience of working in an HR/People Team, specifically in a recruitment support role – we welcome applications from those with more experience but highlight that this role is as described above
• Working within a professional services environment would be beneficial
• A working knowledge of the People processes within a corporate environment
• Direct recruitment experience may be helpful
• Good understanding and experience of key legal requirements relating to legislation particularly with regards to discrimination and immigration regulations

What you’ll need to succeed:
• Strong attention to detail
• Ability to multi-task completing priorities
• Being pro-active and enthusiastic to support the business
• Knowledge of the basics of good HR/People practice and how to add value
• Great ideas and ability to communicate them
• Strong organisational skills
• Strong communication skills
• Capacity to establish professional credibility quickly
• PC literate
• Adaptable and flexible with great ideas for improvement
• Able to maintain confidentiality
• Creativity, curiosity and a sense of humour!

Business Tax Supervisor

Essential Job Functions

Duties and responsibilities would include the following:

• Corporation tax compliance work on a portfolio of clients including both standalone companies and groups
• Reviewing computations prepared by junior staff and taking responsibility for the timely delivery of a high quality service to clients
• Liaising with HMRC on queries into tax returns
• Some tax advisory work, under the supervision of managers, to partners and clients including:
– research and development tax relief
– group tax planning
– venture capital tax reliefs
– share schemes and valuations
• Preparation of the tax sections of due diligence reports
• Completion of EMI and EIS/SEIS documentation
• Assisting in the developing and training of junior staff in the department
• Assisting managers with billing and managing work in progress on portfolio of clients
Person Specification

Work Based Competencies

• Has previously managed a client portfolio of corporate clients
• Some involvement with providing advisory work is preferred but not essential.
• Good Microsoft skills, outlook, excel, word
• Knowledge of Alphatax preferred but not essential

Behavioural Competencies

• Deliver work to a high standard and meet deadlines
• Able to demonstrate good client focused skills, ability to work unsupervised, work within a team, influence and negotiate.
• Good communication skills essential, being able to communicate with all levels externally and internally

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • Register of Overseas Entities arrives
  • HMRC One to Many letters
  • HMRC is looking for more data
  • HMRC increases interest rates
  • CJRS enquiries
  • AAT calls for proper qualifications
  • Tax avoidance promoter fined
  • FRC sets new records
  • FRC publishes PIE register regulations
  • And finally… farewell Companies House London

Click the button below to download this week’s edition, or read our previous editions here.

 

Liability Partnerships (LLP) – are you compliant with the Salaried Member Rules?

Background 
LLPs were introduced in 2000 and quicky gained in popularity with owner-managed professional services firms, such as accountants, lawyers and asset managers, due to the combination of flexibility and limited liability status that the structure offered. A key feature is the transparency of tax and partners are classified as self-employed. This view was supported by early tax cases. The main advantage for LLPs having self-employed members is the saving of employers’ National Insurance (NI) (currently at 15.05%).

However, over the years, HMRC grew uneasy that certain individual partners were providing services akin to employees (disguised employees) and in April 2014, the Salaried Members Rules (SMR) were introduced. Statutory provisions were introduced as the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 Sections 863A to 863G by Finance Act 2014, stating that if Conditions A to C are all met (see below), the member will be taxed as an employee.

For the avoidance of doubt, these rules do not apply to general partnerships or limited partnerships that are formed under Partnership Act 1890 and Limited Partnerships Act 1907 respectively. Additionally, they do not apply to entities outside the UK that have structures broadly equivalent to a UK LLP.

Despite HMRC’s efforts to enforce the legislation by sending notices of enquiry, checking partnership tax returns and issuing nudge letters, there have been no judicial decisions until the recent First Tier Tribunal (FTT) decision on BlueCrest Capital Management (UK) LLP v HMRC [1] released on 29 June 2022. The amount of employer NI at stake is circa £55 million.

It should be noted that FTT decisions are not binding and that either BlueCrest or HMRC, or both, may appeal. The case will however impact many in the asset management industry, especially those who rely on their members failing the set conditions.

On a positive note, the case has provided some helpful interpretation of the rules.

The rules
SMR treats LLP members as employees for tax purposes if all the following three conditions are met:

A) If at the relevant time it is reasonable to expect that at least 80% of the total amount payable by the LLP for the individual’s services in individual’s capacity as a member of the LLP will be ‘disguised salary’. This includes payments which are either fixed, variable but without reference to the overall profit or loss, or is not in practice affected by the overall amount of profits or losses of the LLP.

B) The mutual rights and duties of the individual do not have significant influence over the affairs of the LLP.

C) The individual’s capital contribution is less than 25% of the amount of the disguised salary it is reasonable to expect the member to receive.

In essence, these rules are there to ensure that only ‘proper’ members of an LLP receive the benefit of the corresponding tax treatment.

Key findings
In the case of BlueCrest vs HMRC, the FTT was only required to consider conditions A and B since both parties accepted that condition C was met and not in question, as it was agreed that members had not made the required capital contributions.

Condition A 
Priority distribution of a fixed amount was agreed to be disguised salary, while allocation of what was left after distributing those amounts was agreed not to be disguised salary. The argument centred around the treatment of discretionary allocation. The variable profit share must be linked to the overall profits and losses of the LLP and not to individual or divisional performance to avoid being considered a disguised salary. Both portfolio and non-portfolio managers’ discretionary allocation was considered to be disguised salary.

Condition B 
Condition B requires the examination of the ongoing contribution a partner would make in a traditional partnership. In contrast to HMRC’s guidance and normal practice, the FTT suggested significant influence encompasses more than just management influence; it means that the partner has influence over financial and operational aspects of the LLP as well. Additionally, the member does not need to have influence over all aspects of the LLP, but they must demonstrate significant influence over a part of it that makes a significant contribution to its operations.

All individuals, with the exception of the portfolio managers with capital allocations of $100 million or more and the desk heads, irrespective of their capital allocation, met Condition B.

Although the case relates to an investment manager LLP, there will be parallels for all professional service firms.

Next steps 
As mentioned above, HMRC are already undertaking reviews of LLPs to ensure that they are being compliant with the SMR and the BlueCrest decision will only see an increase in their compliance activity. LLPs should therefore be taking the following action:

  • LLPs that have received adverse decisions from HMRC should consider their position, both historically and going forward
  • For LLPs relying on members failing conditions A, the LLP should ensure any bonus or performance share varies with overall LLP’s profit/losses
  • All LLPs should review their LLP structure in light of this judgement. This entails having a robust process in place to demonstrate that they failed one of the conditions and revalidating their conclusion at each re-test date
  • Reassess compliance regularly using trigger points such as year-end, recruitment, promotion, retirement, new teams and business lines etc.

How we can help
As we represent a number of LLPs in the Financial Services sector, our team has in-depth experience and knowledge of the SMR. We can help you assess member activities to determine if you are compliant with SMR and mitigate any risks identified. For more information or to discuss the above, please contact your normal haysmacintyre contact or the Employment Tax Team.

Audit Manager, Financial Services

Roles and Responsibilities

Responsibilities below are generalised and are no way exhaustive:

▪ Audit: statutory and CASS audit, planning, completion, attend / lead client meetings etc.
▪ Being a key point of contact throughout the year
▪ Building and maintaining strong relationships with existing clients as well as prospective clients
▪ Accounts preparation
▪ Provision of general business advice to clients
▪ Managing the overall service delivery to clients
▪ Ad hoc special projects
▪ Client billing and job recoverability
▪ Prospective client meetings
▪ Assist in supervising/managing the audit staff including having a responsibility for the coaching and development of the team members reporting directly into you taking responsibility for career development of others
▪ Business development activities such as building relationships with target clients and referrers in the Financial Services sector
▪ Assist where required in the general running of the audit department
▪ Reporting directly to the partner and having several direct team members report to you.

The candidate

Behavioural competencies

▪ The successful candidate will be able to multitask in terms of handling multiple clients simultaneously
▪ Excellent technical and personal skills to service a portfolio of clients efficiently and effectively
▪ Excellent communication skills and be confident, articulate and able to communicate at all levels externally and internally
▪ Ability to produce high quality business style reports for non-executive committees
▪ Presentation skills for tendering for new work
▪ A team player with the ability to prioritise work and work to tight deadlines
▪ Strong organisational skills
▪ Have a proven track record of establishing and maintaining strong relationships
▪ Ability to successfully support, nurture and motivate different team members

Work based competencies

▪ Financial Services sector experience
▪ Expert in the financial elements of the FCA handbook
▪ Strong knowledge of UK GAAP and international standards on auditing
▪ Working knowledge of Tax
▪ Experience of Caseware or similar accounts production software
▪ Experience of management of the audit from planning to supervision and onsite reviews
▪ Qualified accountant

Business Tax Assistant Manager

The Role

Duties and responsibilities would include the following:

• Managing a portfolio of clients including both standalone companies and groups;
• Reviewing computations prepared by other members of staff and taking responsibility for the timely delivery of a high-quality service to clients;
• Reviewing letters and computations prepared by other members of staff;
• Liaising with HMRC on queries into tax returns;
• Tax advisory with managers and partners to clients including:
– research and development tax relief;
– structures – company, LLP, etc.;
– restructuring;
– group tax planning;
– international matters;
– share schemes and valuations;
– venture capital tax reliefs; and
– tax due diligence reports.
• Completion of EMI and EIS/SEIS documentation.

Person Specification

• Deliver work to a high standard and meet deadlines;
• Able to demonstrate good client focused skills, ability to work unsupervised, work within a team, influence and negotiate; and
• Excellent communication skills essential, being able to communicate with all levels externally and internally.

Work-Based Competencies

• Has previously managed a client portfolio including groups;
• Will already had some involvement with providing advisory work;
• Good Microsoft skills, outlook, excel, word; and
• Alpha tax knowledge preferred

Business Tax Senior Manager

The role includes the following:

• Tax advisory projects with partners and clients including:
o Corporate restructuring and demergers
o Research and development tax relief
o International matters
o Venture capital tax reliefs
o Share schemes and valuations
o Corporate and property acquisitions and disposals
o Tax sections due diligence reports

Training will be provided to develop your knowledge in any of these areas with limited experience.

• Managing a small portfolio of large corporate clients including both standalone clients and
groups across sectors. Responsible for:
o Review of corporate tax compliance on these jobs including advising on areas such as loss utilisation and group matters including the corporate interest restriction rules
o Tax advisory work arising on this portfolio
o Liaising and assisting engagement partners
o Identifying tax efficient opportunities for clients and liaising with partners on implementing those opportunities
o Responsible for managing billing and work in progress
o Assisting partners and the business tax team on tax technical queries
o Opportunities to get involved in the firm’s sector-based business development activities
o Opportunity to assist with team responsibilities in corporate team including line management and assisting in development, training and the appraisal process

Overall the business tax team headcount is 35 – this role will be working with a sub team of 10, being a combination of Managers, Supervisors, Seniors and Trainees

Get in touch