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HMRC internal manual

International Manual

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HM Revenue & Customs
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DT Agreements: Japan - Income from a UK source paid to a resident of Japan

Claims by Japanese approved investment funds (Article 28A)

What a Japanese approved investment fund is:

An approved investment fund of Japan means either:

  • a securities investment trust as defined in Article 2 of the Securities Investment Trust Law (Law ? 198 of 1951), or
  • a loan trust as defined in Article 2 of the Loan Trust Law (Law ? 195 of 1952).

How you recognise a Japanese investment fund:

The answer to question 7 on form Japan/Company/Credit or to question 6 in Part B ofform Japan/Company should tell you whether the claim is being made by a company as themanager or trustee of an approved investment fund. If it is, then the answer should alsogive the title of the fund.

Double Taxation Technical Advice group holds lists of approved funds, which should beconsulted to ensure that any fund making a claim is indeed approved. The lists areprovided six-monthly by the Ministry of Finance in Japan; funds can be removed from thelists, as well as added to them.

The full title of such a fund ought to include the name of the investment trust manager(“ITM”) which administers it. Without the manager’s name as a prefix it isbarely feasible to search the lists of approved funds, which are presented separately foreach ITM.

What relief you can give:

Article 28A provides for relief to be allowed under the interest (12) and dividends(11) articles of the convention.

Relief cannot be allowed under UK domestic legislation, because of the problems insecurely identifying beneficial ownership at the level of the natural person, common tomany forms of collective investment vehicles (see INTM336200 for more details).

So for example, any relief due in respect of British Government Securities issued with theFOTRA condition (INTM368000), can only be allowed down to 10%under article 12: interest.

But by special administrative arrangements, you can allow full relief inrespect of foreign dividends and interest, by means of a claim on form Japan/Company,rather than on form A1.

Why you can accept claims presented by fund managers

Fund managers claiming under Article 28A in respect of the income of an approvedinvestment fund are regarded under the double taxation convention as claiming on behalf ofthe investors participating in that fund who would be entitled to claim relief in theirown right under the interest and dividends articles.

Special points to note

Managers of investment funds in Japan are usually investment companies. They cantherefore hold securities on their own account, on behalf of customers, for customersunder management agreements, or in the form of investment funds.

So you should ensure that you are certain of the capacity in which the manager is makingthe claim, particularly where question 6 or 7 has been answered. Experience shows thatsuch answers are not invariably appropriate, and so can sometimes be unintentionallymisleading.

Particularly when a claim is submitted in the name of an investment trust manager,you should ensure that it does not cover the income of a group ofinvestment funds handled by that manager, some of which may not have approved status.

You should only consider a claim by an investment trust manager itself inrespect of income to which that manager itself is beneficially entitled.Otherwise you should have a separate claim for each approvedinvestment fund which that investment trust manager administers.

So each approved investment fund should be given its own separate claims file and FDreference.