Bonds

Question 1

What is required for offshore funds to acquire and maintain reporting status?

Answer 1

• Fund manager must apply to HMRC for reporting fund status
• This will be granted where fund manager reports details of all its income to HMRC
• Fund retains reporting status as long as it complies with reporting fund rules.

Question 2

Compare the taxation treatment of a reporting fund with a non- reporting fund.

Answer 2

Reporting Fund

• Subject to income tax on any income arising whether distributed or not
• Dividends are treated in the same way as UK based funds/use of dividend allowance / tax rates
• Interest is treated in the same way as UK based funds
• Any capital gains on sale are subject to the usual GCT rules

Non-Reporting funds

• Gains on disposal, which includes accumulated income, calculated on CGT principles
• but annual exempt amount is not available
• the gain is taxed as income at 20%, 40% or 45%
• The starting rate for savings income, the dividend allowance and the personal savings allowance are not available

Question 3

Explain calculation on investment bond encashment

Answer 3

Will be a chargeable event
Take en-cashment value
Add previous withdrawals
Deduct original investment
Deduct previous chargeable gains
Add total to total income for that tax year
If pushed to next tax tier can use top slicing
Divide gain by number of complete years
Gain taxed at difference between basic and individuals appropriate rate
State what rate is paid