TSEM3250 | Capital items that are income for tax purposes: off shore income gain

ICTA88/S761 (1)

The treatment of gains from an offshore fund depends on whether the fund has achieved distributor status. The fund can claim distributor status if it regularly distributes the bulk of its income to investors, and satisfies certain other conditions. Residency’s web site has a list of all such funds.

Fund has successfully claimed distributor status and does not operate equalisation

Trustees return gains on disposal of an interest in the fund on the Trust and Estate Capital Gain Tax Pages.

Fund has successfully claimed distributor status but operates equalisation

Part of the gain is chargeable to income tax, the balance as a capital gain. The split is usually shown on the redemption voucher that the trustees receive.

The amount that is subject to income tax is chargeable at the trust rate. However trustees of an unauthorised unit trust are not chargeable at the special trust rate on that amount to the extent that it is matched by an equivalent amount of annual payments made. It is instead chargeable at basic rate.

Fund has not successfully claimed distributor status

The gain is chargeable to income tax at the trust rate but see the preceding paragraph in the case of unauthorised unit trusts.