Overseas Investment Funds

Recently we have seen an increase in the number of taxpayers being contacted by HMRC using the information they have received regarding taxpayer’s investment in Offshore Investment Funds.

It is important to understand the correct tax treatment of any income and gains arising from Offshore Investment Funds as these can be quite complex. If you think that you may have an investment in an Offshore Investment Fund, HMRC offers guidance on Offshore Funds to help you decide the status of your Offshore Investment Fund.

Some funds have applied to HMRC to be treated as ‘Approved offshore reporting funds’. To check if your investment is a Reporting Fund, you can visit www.gov.uk and search for ‘Approved Offshore Reporting Fund’. These Funds are treated differently compared to funds that do not have this status. The status of a fund will affect the tax treatment of any income and gains from these investments and the correct amount to be reported on your self-assessment Tax Return

Reporting Funds – UK Income Tax is due on all distributions made from a fund to an investor, or distributions they are deemed to have received such as Excess Reportable Income. Any disposal of an investment in a Reporting Fund will be treated as a Capital Gain Tax transaction.

Non-Reporting Funds – UK income Tax is only due on distributions made from a fund to an investor. Any gain arising from the disposal of an investment in a Non-Reporting Fund is treated as an income and taxed as Offshore Income Gain.

It is important to check that you have reported the correct interest, dividend and gains arising from Offshore Investment Funds on your previous year’s Tax Return. If you need to amend any Tax Return more than 12 months past the filing deadline, we can assist you with using the Digital Disclosure Service to HMRC in bringing your tax affairs up to date.