Distributions from offshore funds

Since 6 April 2008 individual shareholders with shareholdings of less than 10% in non-UK resident companies have been entitled to a non-payable dividend tax credit.

However the tax credit was withdrawn for offshore funds as some collective investment schemes.

The Chancellor announced that the Finance Bill will restore the non-payable dividend tax credit for offshore funds that are largely invested in equities.

It will also provides that where the offshore fund is substantially invested in interest bearing assets individuals receiving distributions will be treated for tax purposes as having received interest and not a dividend or other type of distribution.

These rules will apply equally to all holdings in offshore funds and have effect on and after 22 April 2009.

However where the offshore fund holds more than 60% of its assets in interest bearing (or economically similar) form any distribution will be treated in...