A letter and accompanying factsheet was sent to approximately 6,000 taxpayers and their agents in November 2019 advising them how to declare income received from Offshore Investment Funds. HMRC has received some feedback that there was a technical error in the factsheet. HMRC’s response is as below.

“Our letter stated:

Investments held within an ISA

Some investments in Offshore Investment Funds can be held in a stocks and shares ISA. You will not have to pay tax on income or capital gains from ISA investments. And you do not need to declare your ISA investments on your tax return. Only investments in reporting funds can be held within an ISA.

This is incorrect.

Regulation 22(1) (a) (iii) The Individual Savings Account Regulations 1998 – see http://www.legislation.gov.uk/uksi/1998/1870/made – provides an exemption for tax for offshore income gains within an ISA, which would seem to suggest that non-reporting funds can be held.

22.—(1) Subject to these Regulations —

(a) no tax shall be chargeable on the account manager or his nominee or on the account investor—

(iii) on an offshore income gain to which a disposal made by any of them of an account investment gives rise, which is treated by Section 761(1) of the Taxes Act as constituting profits or gains.

Therefore, this details that both investments in reporting and non-reporting funds can be held within an ISA and you will not have to pay tax or capital gains from ISA investments. In addition, you do not need to declare your ISA investments on your tax return.

Therefore this briefing is to alert you to this issue. Should customers need to amend their SA return as a result of this error, further guidance is at this link: https://www.gov.uk/self-assessment-tax-returns/corrections.”