TCTM04501 - Investment Income: Definition of Investment income

Definition of investment income

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 10(1)

Investment income means:

  • Any interest of money, whether yearly or otherwise, or any annuity or other annual payment, whether it is payable within or out of the UK, either as a charge on any property of a person paying it by virtue of any deed, or will, or otherwise, or as a reservation out of it, or as a personal debt of obligation by virtue of any contract, or whether the payment is received and payable half-yearly or at any shorter or longer period, but not including property income.
  • Any discounts on securities
  • Any income from securities payable out of public revenues of the UK or Northern Ireland
  • Dividends and other distributions of a company resident in the UK and the accompanying tax credit; and
  • Gains from life insurance policies etc., which are chargeable to income tax under Chapter 9 of Part 4 of ITTOIA disregarding section 535 (top-slicing relief).
Cryptoassets

The way in which cryptoassets are treated for tax credits will depend on how they are treated for tax, i.e. income tax or capital gains tax. In the majority of cases cryptoassets would be taxed under the capital gains rules. This means that for tax credits only any interest on the gain will be treated as income as the gain itself would be treated as capital. However there may be instances where cryptoassets will be subject to the income tax rules, in which case they would be treated as investment income for the purposes of tax credits.

Whether or not cryptoassets fall under capital gains or income tax will be a matter of fact, and the claimant should know this. It is important that each case is looked at on an individual basis and assessed on its own merits.

HMRC’s Cryptoassets Manual states

“…there may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and they will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax rules would take priority over the Capital Gains Tax rules.”

In these cases the income will be treated as trading profits of the business for the purposes of tax credits