IFM08410 - Authorised Contractual Schemes (ACS): Double Tax Relief and Tax Treaties

As both Co-ownership ACS and Partnership ACS are fiscally transparent, they are not generally treated as resident for the purposes of double taxation treaties and conventions between the UK and other tax jurisdictions. Instead, the availability of double taxation reliefs will depend on the convention between the investor’s jurisdiction of residence and the jurisdiction where the income or gain arises. For example, a tax jurisdiction which applies a low rate of withholding tax to pension funds may apply that rate to investors in an ACS which are pension funds.

Provided the overseas jurisdiction recognises an ACS as a transparent entity, investors should be entitled to the same treaty benefits as though they had made the investments directly. UK legislation cannot prescribe how an ACS is treated by a foreign jurisdiction but HMRC would expect that they would view an ACS as transparent for tax purposes.

Investors will need to consult the relevant double tax agreement in order to establish whether treaty benefits are applicable and, if so, in what circumstances. The treatment of an ACS will need to be discussed with the overseas jurisdiction concerned. Any claim for treaty relief will need to be made using the procedures existing in that state.

In practice fund operators/administrators may offer to make claims for benefits on investors’ behalf. In that case, the fund operator or administrator will make clear what information they need from investors to establish claims for treaty benefits.

Full information on UK double tax conventions can be found on the HMRC website.