Income Tax (Trading and Other Income) Act 2005 section 373

Open-ended investment company interest distributions

Section 373 explains how distributions from an open-ended investment company (OEIC) that are designated as yearly interest in the distribution accounts are treated for income tax purposes.

• Where an OEIC's distribution accounts show the total amount available for distribution as yearly interest, the distributions are treated for income tax purposes as payments of yearly interest made by the company to its shareholders.
• Each shareholder's share of the interest payment is calculated in proportion to their shareholding relative to the total amount available for distribution.
• This treatment does not apply if the OEIC is an approved personal pension scheme.
• The amounts treated as yearly interest are charged to income tax accordingly, even though they may not originally be interest in nature — effectively re-characterising other types of income as interest in the hands of the investor.