Reporting funds: tax treatment of participants in reporting funds: remittance basis
Where individuals not domiciled in the United Kingdom are taxed on the remittance basis then the normal remittance basis rules will apply to income arising from the reporting fund.
In the case of income that is reported but is not distributed then that income has not been remitted to the UK.
In a case where the reporting fund is transparent for UK tax purposes then the income will arise from the underlying assets and not from the fund. In such a case the income may sometimes arise in the UK (even though the fund itself is domiciled offshore). Where the income arises in the UK the remittance basis does not apply. Where the income arises offshore then the remittance rules will apply.
The proceeds of a disposal of a reporting fund will normally constitute a ‘mixed fund’ for the purposes of the remittance basis rules. This is because the proceeds may have been funded by undistributed reported income as well as by the original investment and any capital growth.