Funds and taxation Part II

Last month, I looked at the advantages of using authorised UK funds and offshore funds with distributor status as a means of supplementing income. The capital gains tax (CGT) rules work in such a way that large amounts can be extracted each year without creating a CGT charge for the investor. However, there are several pitfalls that one has to be aware of when devising a strategy using funds. The first potential pitfall is income, as not all the yield in a fund will come from capital gain. There are, therefore, income tax issues to consider. Income earned by authorised funds is treated a...