The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Offshore funds are investments such as foreign unit trusts and open ended investment companies (OEICs).
This note introduces this topic, and aims to help you understand whether the taxpayer’s investment is within the special offshore funds tax regime and, if so, how it will be taxed. In particular, it explains the difference between ‘reporting’ and ‘non-reporting’ funds. It considers the tax position of the UK resident individual investor.
The taxation of offshore funds is very complex. This guidance note, and the linked notes on opaque funds, transparent funds, and changes in fund status, are only an outline of the topic, and you may need specialist advice. In particular, this suite of guidance notes does not cover:
the interaction between offshore funds and the remittance basis. For this, see Tolley’s Income Tax 2015/16 Chapter 50.8. For the remittance basis generally, see the Remittance basis - overview guidance note
the complexities where one offshore fund invests in another, has an ‘umbrella’ structure involving sub-funds, or where trusts are involved
For further reading, see Simon’s Taxes Division B5.7.
Many investment funds, such as unit trusts, are based in the UK. These UK resident investment funds pay corporation tax on the income arising in the fund at the rate equivalent to the basic rate of income tax, on an annual basis.
Offshore funds are, by definition, not subject to UK tax. Absent specific legislation, it would be possible to roll-up undistributed income in an offshore fund, so that no tax was paid until the investor sold his interest in the fund. At that point he would realise a chargeable gain, taxed at a lower rate. The offshore funds legislation aims to prevents this conversion of income into capital.
It achieves this by dividing offshore funds into those where:
the investor is taxed on the income as it arises. Investors in these funds are within the scope of capital gains tax (CGT) when they dispose of their interest
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
There are several sets of provisions in the Taxes Acts which relate to ‘close’ companies, most of which are anti-avoidance measures aiming to catch transactions between those companies affected and their owners, where there may otherwise be a tax advantage. Broadly speaking, most owner-managed or
‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
Income and gains may be taxable in more than one country. The UK has three ways of ensuring that the individual does not bear a double burden:1)treaty tax relief may reduce or eliminate the double tax 2)if there is no treaty, the individual can claim ‘unilateral’ relief by deducting the foreign tax
This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the vendor in exchange for shares
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.