It also proposes provisions for sub-funds to provide information about the separation of income and capital.
The current regime does not allow an offshore fund of funds to hold more than 5 per cent of its investment in non-distributing funds, income has to be calculated according to UK standards and distributor status for funds is granted retrospectively leading to tax uncertainty for investors.
IMA director of authorised funds and taxation Julie Patterson says: “IMA welcomes these proposals which are a response to industry concerns about the relative attractiveness of such funds for UK investors. The proposals represent a significant improvement.
“The regime provides certainty to investors that the fund in which they are invested is a distributing fund, thus allowing income and capital growth in the fund to be taxed accordingly.”