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HMRC internal manual

Company Taxation Manual

Authorised investment funds (AIFs): gross payment of interest distributions: reputable intermediary condition - reasonable but mistaken belief

Where the fund (trustees of an authorised unit trust or the open-ended investment company), has, in reliance on the reputable intermediary condition being satisfied, made an interest distribution without deducting tax it may be found that the reasonable belief that the recipient was not ordinarily resident was misplaced. In this case the IT that ought to have been deducted may be recovered from the fund, with interest thereon (SI2006/964 Regulation 29).

If it is found that the fund did not have reasonable grounds for believing that the reputable intermediary condition had been met, but still made a payment without deducting tax, it may be liable to penalties as well as recovery of the tax and interest.