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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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AIFs: Property authorised investment funds (Property AIFs): tax treatment of distributions in the hands of participants: non-resident participants

Property income distributions (PIDs) made to non-resident participants

PIDs receivable by non-resident participators are in general chargeable to income tax(regulation 69Z8(2) SI 2006/964), in the same way as they are for UK-resident income taxpayers. In the same way as for UK resident income taxpayers, PIDs are payable underdeduction of income tax at the basic rate.

Except where non residents are carrying on a trade in the UK, as set out below, PIDs willalways be paid to non-residents under deduction of basic rate income tax. Dispensation tooperate nil or reduced rates of deduction will not be given.

Although the PIDs are treated as income from UK property, the Non-Resident Landlord Schemedoes not apply to the income (as the PID is paid under deduction of basic rate incometax).

PAIF distributions (interest) made to non-resident participants

For the purposes of liability to UK income tax, a PAIF distribution (interest) istreated as a payment of interest originating in the UK.

Except where non residents are carrying on a trade in the UK, as set out below, PAIFdistributions (interest) will always be paid to non-residents under deduction of savingsrate income tax. Dispensation to operate nil or reduced rates of deduction will not begiven.

PAIF distributions (dividends) made to non-resident participants

These are treated in the same way as dividends paid by UK companies, and no tax isdeducted.

Treaty claims for repayment of tax deducted

If the recipient is resident in a state with which the UK has a double tax treaty, theymay be able to make a treaty claim for payment of some or all of the UK tax withheld,depending on the provisions of the relevant treaty and the circumstances of the recipient.Claims are processed by Centre for Non-Residents in the usual way.

The overall withholding rate which actually applies to the whole (three part) distributionwill vary depending on the mix of types of income in the distribution and so thepercentage that can be reclaimed may vary from one distribution to another.

Hence, a treaty claim will be required in respect of each distribution.

Exception to the tax treatments described above

The only exception to the above is non-residents carrying on a trade in the UK througha permanent establishment who are required to bring the relevant distribution into accountin computing their chargeable profits for corporation tax in the same way as UK companies(see CTM48853).