Dividends
In the hands of an investor (unit holder) within the charge to IT, dividend distributions are treated in the same manner as any other UK company dividend.1
Equalisation is returned capital sum. As it is a capital receipt, it should be deducted from the unit holder’s cost of the units for CGT purposes. 2
It should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. 3
Calculation for tax return
Dividend
Tax payer usually receives a Tax Certificate from his Broker showing both dividends paid and equalisation figure. Dividend figure included equalisation, so we need to deduct equalisation figure to get to the Dividend figure that needs to be reported in the tax return.
Capital Gain
Equalisation should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. 3
Tax Return
UK Company Dividends are put in Box 4 and AIF distributions Box 5 of SA100 TR3.
Notes:
- IFM03350
- see IFM02230 for an example
- CG57705
Roy Accountants 