Reporting Status

Tax information: UK reporting status

1. Background

The UK Finance Act 2009 introduced legislation to modernise the current funds tax regime and provide more certainty to UK investors. As part of this new legislation an offshore fund  can now apply to become a Reporting Fund. Assuming such an application is accepted by the UK tax authorities, UK investors will then be able to access beneficial tax rates on any gain on disposal of their investment in the fund.




For each fund year end, a reporting fund is required to calculate and provide to investors and to the UK tax authorities information as regards the reportable income of the fund for that year. The reportable income of a reporting fund is calculated with ‘total comprehensive income’ as the starting point with some adjustments required to be made according to UK tax regulations.




Please note that there is no requirement under the Reporting Fund regime for funds to actually distribute any reportable income to investors.


UK reporting status on the following funds has been received with effect from 01 January 2010

• PSigma Inflation Plus Fund A (GBP)

• PSigma Inflation Plus Fund B (GBP)

• Psigma Inflation Plus Fund C (GBP)

• Sanlam Global Best Ideas Fund A (GBP)

• Sanlam Global Best Ideas Fund C (GBP)

• Sanlam Global Financial Fund A (GBP)

• Sanlam Global Financial Fund C (GBP)

• Sanlam African Frontier Market Fund A (GBP)

• Sanlam African Frontier Market Fund C (GBP)



2. Information on the implications of this change in tax status for private investors.


1. Taxation of distributions

Under the Reporting Fund regime individual investors will be taxed on an annual basis on the net reportable income attributable to the number of fund units held on the final day of the fund’s accounting year i.e. on 31 December each year.  The effective tax rates on this income (after taking into account the 10% tax credit available for fund distributions) are as follows:

• Basic rate taxpayer = no additional liability, 

• Higher rate taxpayer = 25% of the reportable attributed amount 

• Additional rate taxpayer = 36.11% of the reportable attributed amount Investors will be taxable on the annual reportable income amount regardless of whether the fund distributes income to its investors.



2. Taxation of gains on disposal

UK resident and domiciled individual investors who dispose (by sale, transfer or redemption) of units in a non-reporting fund are liable to UK income tax on any gains at the rates of 20%, 40% or 50%, currently, depending on total income. For reporting funds any gain on the disposal of fund units is subject to the more favourable capital gains tax regime, currently at the rate of 18% or 28%. Any income which has been reported to investors but not distributed may be deducted when calculating this gain. UK resident and domiciled individuals are also entitled to an annual exemption to offset against total annual gains, currently at the level of £10,100.

Since the income tax rates (40% or higher for those with taxable income in excess of £37,400) are higher than capital gains tax at up to 28%, not applying for reporting fund status is clearly disadvantageous for many of our UK resident unit holders.

Therefore, in order to achieve a more beneficial tax treatment of our clients, Sanlam applied for Reporting Fund status in respect of those funds listed above. With this new “reporting fund” status, the gain on disposal of units by UK resident and domiciled investors is subject to capital gains tax, currently at the rate of 18% or 28%, rather than the applicable income tax rates outlined above.

3. Summary of what a private investor should do:
• If you became a unit holder in a Sanlam fund for the first time after 01 January 2010 you will automatically benefit from the new tax regime. No action on your part is required.
• If you became a unit holder in a Sanlam fund before 01 January 2010 please contact your tax advisor.

4. Tax reporting information

The necessary figures for completing tax returns will be reported to you. A fund must report its reportable income to its investors within six months of the end of the accounting period, i.e. by 30 June 2011 for the accounting period ended 31 December 2010.

Disclaimer
The information above serves only as a general guide to the UK tax consequences of making an investment in the Sanlam  funds and only applies to UK investors who are resident or ordinarily resident in the UK for tax purposes and who hold their units as an investment. Unit holders should consult a professional adviser for advice regarding their tax position.