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Posted Fri, 19 Jan 2024 12:44:05 GMT by
Dear HMRC, I, a higher rate tax player, hold US ETF and interest income from distributions are generated, and there are 30% of tax paid to US Gov, My Question is: Q1. The ETF hold 99% of US-GOV teasure bonds, accourding to SA106, the distributions from offshore fund have 60% invested in "interest bearing assets" should be regraded as interest income? So the ETF distributions should report to HMRC as interest income,Am I correct? Q2, If so, the FTC rate should be full relief according to "Digest of Double Taxation Treaties" page 36-37, that interest income can have full relief and dividend have 15% FTC. Am I correct? Example: interest income = 10000 pounds 30% tax paid to US Gov = 3000 pounds Higher tax rate 40 % = 4000 pounds Total: FTCR claims is 3000 pounds Am I correct? please correct me if I miss somethings. Thx Terry
Posted Mon, 22 Jan 2024 15:53:14 GMT by HMRC Admin 5

An Exchange Traded Fund (ETF) is a form of Collective Investment Scheme and contains a pool of investments (‘the scheme property’) derived from the contributions of investors. The pool of investments is divided into equal portions called shares, and investors hold a number of shares depending on how much they have contributed. 
The investors in the ETF are beneficially entitled to an undivided share of the investments subject to the ETF and are referred to as shareholders. The price of shares is determined by the Authorised Corporate Director of the ETF (usually on a daily basis) at the current market value of the investments held in the fund. 
The type of tax charged, is determined by the asset class.  Equities, are subject to dividends and Capital Gains tax, whereas, Bonds are subject to Income tax and Capital Gains tax and commodities subject to Capital Gains tax only.  The foreign section of the tax return, can declare all 3 asset classes and include any foreign tax deducted, so that a foreign tax credit can be claimed.

Thank you

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