Non-Reporting Fund

We have a non-reporting mutual fund that has paid out (and reinvested) a dividend and capital gain payment. Are both the capital gains and the dividend reported as OIG's? or just the capital gains, with the dividends reported (as dividends) separately

Hi,

You can see guidance here:

Offshore funds (Self Assessment helpsheet HS265)

Thank you.

Hi Thanks for the link. For clarity, this is a non-reporting mutual fund, that has automatically reinvested a dividend and capital gain distribution into the same fund. We have not personally sold or received distributions from the fund. Can you confirm if we would need to declare both as they were reinvested without actually being paid to us? If we do need to declare them, would they both be declared as 'Other overseas income and gains', or would we report the dividend as 'Dividends from foreign companies’

Hi BritishAl23,
The main effect for UK investors who have invested in non-reporting funds, as opposed to reporting funds, is that on disposal of their interests they will be liable to tax on any gain arising as if it were income (that is, an offshore income gain, or ‘OIG’) instead of as a capital gain.
IFM12300 - Offshore Funds: introduction: non-reporting funds
As you have not yet disposed of them or received a distribution, there is nothing to declare at this time.
Thank you. 

Thanks. Just want to be 100% clear on this, as I have seen differing advice on here. This is a US non-reporting fund, and we received a US 1099-div tax document detailing the dividend and capital gains distribution for reporting to the IRS. However, from a HMRC perspective, we do not need to declare either of the dividend or capital distributions that the fund manager has reinvested back into the fund (through the purchase of additional shares in the fund) as we did receive the distribution or withdraw from the fund. If we were to make a withdrawal from the mutual fund (based on current rules) we would need to declare the gains as OIG's.

Thanks. Just want to be 100% clear on this, as I have seen differing advice on here. This is a US non-reporting fund, and we received a US 1099-div tax document detailing the dividend and capital gains distribution for reporting to the IRS. However, from a HMRC perspective, we do not need to declare either of the dividend or capital distributions that the fund manager has reinvested back into the fund (through the purchase of additional shares in the fund) as we did NOT receive the distribution or withdraw from the fund. If we were to make a withdrawal from the mutual fund (based on current rules) we would need to declare the gains as OIG's.

Apologies for any confusion. Just to be clear: From your previous guidance, that from a HMRC perspective, we do not need to declare either of the dividend or capital GAINS distributions that the fund manager has reinvested back into the fund (presumably through the purchase of additional shares in the fund) as we did NOT receive the distribution or withdraw from the fund.

Hi BritishAl23,
Non reporting funds are treated as 'offshore income gains' and are subject to Income Tax not Capital Gains Tax.
The gains should be entered in box 41 of SA106 and in the box marked "Other overseas income and gains" on the online return.
Whilst the distributions have been reinvested back into the fund, these are still taxable income.
Thank you. 

Thanks the reply. However, this seems to be in direct contradiction with the advice provided yesterday, that suggested that as we had not disposed of our interest in the fund, and that there was nothing to declare at this time?

Hi BritishAl23,
The investor in non reporting funds is taxable on income that has been distributed to them.
Please have a look at the guidance on non reporting funds here:
IFM12100 - Offshore Funds: introduction: background to the treatment of UK investors in offshore funds
Thank you. 

Hi BritishAl23,
If the distribution is re-invested into the fund, then there is no tax.
If the distibution is paid to you, then there is Income Tax liability.
When the fund is disposed of, then there will be a libility to Income Tax and not Capital Gains Tax.
Thank you. 

Thanks. Just to clarify around "paid to you", that this references money paid out to an external bank account etc, opposed to our scenario where money was distributed from the pooled fund to us internally and reinvested into additional shares in the same fund. To confirm this guidance applies to both the dividend and CG.

Hi BritishAl23,
Please refer to guidance at IFM13100 (IFM13100 - Offshore Funds: Participants in offshore funds: introduction: background to the treatment of UK investors in offshore funds)
which states UK investors in non reporting funds are chargeable to IT on any distribution the fund actually makes to them. This guidance is regarding the charge to IT only and not CGT.
Thank you.