This month HMRC is writing to taxpayers who HMRC believes have invested in offshore collective investment funds. The purpose is to remind taxpayers to declare the income received from those investment funds and any gains made when the funds are cashed-in.
If you hold money in such off-shore funds, we need to know whether the fund is an “approved offshore reporting fund”, a “non-reporting fund”, as the tax treatment is different.
Actual or deemed distributions to the investor may arise in the form of interest or foreign dividends. The reporting is complex:
- Foreign dividends of up to £300 should be included in box 6 on the main part of the tax return.
- Foreign interest of less than £2,000, where no tax has been deducted at source, should be included in box 3 on the main tax return.
- Larger amounts of interest or dividends should be included under reportable income on pages 2 and 3 of the foreign income supplementary pages.
- Profit made on a fund which is not distributed to investors is called excess reportable income (ERI). This ERI must be included on the SA return for the tax year which includes the fund distribution date.
- Gains made on disposal of the fund are subject to CGT.
Where the fund is held within an ISA no reporting is required.
- Distributions to the investor must be declared and are subject to income tax
- Gains made on disposal of the fund are taxed as offshore income gain and are subject to income tax. Report this on the foreign income pages in box 41 of the tax return.
We may need to amend an earlier tax return to declare ERI or gains due for that period. If you have any queries please contact our office.