Taxation in the UK

Below you find information about the UK taxation of your investments in Jyske Invest International. When you are fully liable to pay tax to the UK – rather than Denmark – your investments in Jyske Invest International will NOT be taxed in Denmark.

Jyske Invest International, Conversion of sub-funds to UK reporting funds tax status from 1 January 2013.

General information

The following taxation commentary and accompanying information is general in nature and does not constitute taxation advice, nor will it necessarily be appropriate or relevant for certain types of investor, such as companies and financial traders, or where sub-funds constitute bond funds.  All investors and prospective investors should seek independent professional advice in relation to their tax position since this will ultimately depend on their particular tax status and circumstances.

Background information

The UK’s ‘offshore fund’ regime was introduced in response to what HM Revenue & Customs, the UK tax authorities (HMRC), perceived to be the potential for avoidance of UK tax by UK investors through the use of non-UK funds to roll up investment income.  In the absence of the offshore funds legislation, investors might be able to convert income receipts into capital, which could then be subject to a lower overall rate of tax.  For example, a UK individual would currently pay capital gains tax at a top rate of 28%, compared to UK income tax at a top rate of 45%.

To eliminate this perceived avoidance, the offshore funds legislation provides that, unless the shares which a UK investor holds are designated as a UK ‘reporting fund’ by HMRC, any gains arising to the investor on a disposal of their shares in the offshore fund are subject to tax as income.

Conversely, a person can generally benefit from capital tax treatment on the disposal of an interest in a UK reporting fund.  However, the investor will be deemed to receive an appropriate share of the income earned by the reporting fund each year, irrespective of whether that income is actually distributed by the fund to the investor.

Special tax rules will apply where the shares convert to a reporting fund during the investor’s ownership period. In this case, investors may be able to make a tax election to secure capital treatment on a disposal of their shares.  The election would, however, trigger taxable offshore income gains at the date of conversion of the offshore fund to reporting fund status.

Tax implications for UK investors in Jyske Invest sub-funds

Jyske Invest has applied for and has received HMRC’s approval for all of its sub-funds to be designated as UK reporting funds with effect from 1 January 2013.

The accompanying flowchart summarises the likely tax impact for UK investors that hold (or have held) interests in these Jyske Invest sub-funds as a consequence of securing UK reporting fund status.

Investors holding shares in these sub-funds should obtain and review the yearly reporting fund information posted on the Jyske Invest website and include relevant details on their UK tax returns, as appropriate.

Frequently asked questions

When should I consider making an election to benefit from capital treatment on a disposal of sub-fund shares?

The sub-fund shares held must have been standing at a gain, based on their market value at 1 January 2013, for an election to be valid.  The election will secure capital treatment and would normally be made in a UK tax return.  In this case, for individual UK investors, the election should be made in the tax return for the year ended 5 April 2013.  The election will result in a conversion charge being triggered, which will result in the difference between the market value at conversion and the base cost of the shares being taxable as income at the date of conversion.

If shares are standing at a gain, but no election is made, any future gains on a disposal of the shares will continue to be taxable as income. Where sub-fund shares are not standing at a gain, a tax election cannot be made, but shares should normally qualify for capital treatment automatically.

Will I just be taxed on amounts distributed to me each year?

The Jyske Invest sub-funds are accumulating funds and therefore no distributions are expected to be made. However, under the reporting fund UK tax rules, investors will normally be taxed on a deemed distribution of sub-fund income treated as being made on 30 June following the end of the relevant accounting year.

This will represent an appropriate share of income received by each sub-fund in which the investor holds shares at the end of each year. The relevant deemed distribution tax information will be made available within six months of the end of the sub-fund’s accounting period to 31 December (ie by 30 June in the following year).   The amount of any deemed distribution will typically be allowable as additional base cost capital expenditure of the investor’s shares, deductible when computing gains on disposal.

I am UK tax resident but non-UK domiciled. What do I need to report on my tax return?
In general, the annual reportable income and any gains will be subject to UK tax on an arising basis. You should consult your tax adviser to ascertain what amounts need to be disclosed in your tax return for each tax year.
I acquired my units before 1 January 2013 and sold my units at a loss. Can I set these losses against my income?
Any losses arising from the disposal of a reporting fund (or non-reporting fund) cannot generally be utilised against an investor’s other taxable income. The losses will be treated as capital losses and may be used against other capital gains, depending on the investor’s own tax position.