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Posted Mon, 24 Jan 2022 05:57:26 GMT by Edward
Hello, Are distributions from Fixed Income Investment Trusts and Closed-ended investment companies to be treated as dividend or interest distributions? I own shares in some Fixed Income investment trusts (GBR domicile) and closed-ended investment companies (GGY & JEY domicile) bought on LSE Main via online UK retail broker platforms. Their portfolios are invested in debt related securities, loans, credit i.e. fixed income. They are classified by Trustnet as Asset Class Fixed Interest and by AIC as IT Debt. There’s one that is qualified as Mixed Assets, but more than 60% is typically invested in fixed income related securities. One of the funds is even a UK reporting fund that qualifies as a Bond Fund. They all pay regular income distributions which brokers in their Consolidated Tax Certificates define as dividends. Instead it seems to me that they should all be treated as equivalent to Bond funds. I think in my self assessment tax return I should declare their various distributions as interest, i.e. included them in “SA106 F2 Box B interest from overseas” for the GGY & JEY domiciled closed-ended funds and in “SA100 TR3 Box 2 Untaxed UK Interest” for the UK ITs. Is it correct for me to do so? Thank you. Regards Edward
Posted Mon, 24 Jan 2022 15:25:16 GMT by HMRC Admin 17

Only your company will be able to advise what kind on income will be distibuted as all these can generate different types of income.

You will then need to report the income based on what they advise. 

Thank you.
Posted Tue, 25 Jan 2022 02:18:03 GMT by Edward
Hello, Some of the investment trusts and closed-ended investment companies I referred to in their dividend declarations designate dividend amounts (usually whole) as interest distributions for UK tax purposes. One offshore company is a UK reporting fund that confirms that "the fund consists of more than 60% of bonds ... is considered a Bond Fund under the Reporting Fund regime". For those companies it seems clear to me that I should declare the distributions as interest in SA100 TR3 Box 2 or SA106 F2 Box B as appropriate. In the SA106 Foreign Notes on page FN 7 in the "Dividends from foreign companies section" it states "There are specific rules about dividends from offshore funds. If the fund has more than 60% invested in interest bearing assets, any distribution that you receive, or that is reported to you is treated as interest received. You need to put this under ‘Interest and other income from overseas savings’." Could you kindly explain when this rule is applied? One of my investments is with a UK reporting offshore fund that pays regular distributions declared as dividends (not designated as interest) but the fund has more than 90% invested in interest bearing assets. Other two Jersey companies listed on LSE have typically 94%+ and 82%-84% respectively invested in interest bearing assets and pay regular distributions declared as dividends (not designated as interest). As a retail client I am not directly in contact with these companies: I invest on a diversified basis via large UK retail brokerage platforms that in their annual consolidated tax certificate confirm the distributions as dividends. I am simply double-checking because this rule in SA106 seems a clear instruction to put the distributions under "interest and other income from overseas savings". I would be grateful if you clarify the applicability of this rule, which seems to be a catch-all rule to specifically cover the situation when a company declares a dividend, without designating it as interest despite investing mainly in interest bearing instruments. Thank you. Regards 
Posted Tue, 25 Jan 2022 15:37:18 GMT by HMRC Admin 17

The guidance relates to offshore funds.

The legislation was enacted in the Finance act 2009.

Please see guidance at :

Investment Funds Manual    .

Thank you.

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