How to Report Excess Reportable Income on Your Tax Return

To report excess reportable income on your tax return, enter it on the SA106 Foreign supplementary pages of your Self Assessment, in the box that matches how the fund’s income is categorised (dividend, interest, property, or miscellaneous), converted to sterling using the exchange rate on the fund’s deemed distribution date. That date is six months after the end of the fund’s reporting period, and it fixes which UK tax year the income belongs to.¹

Excess reportable income (ERI) is the share of an offshore reporting fund’s annual profit that was earned but not paid out to you. Under the Offshore Funds (Tax) Regulations 2009, you’re taxed on your share of that undistributed profit as if you had received it in cash.² The rest of this article walks through the steps in the order you actually need them.

Check the Fund Has Reporting Status First

Before anything else, confirm the fund is on HMRC’s approved list of reporting funds. HMRC publishes a searchable spreadsheet on GOV.UK titled “Approved offshore reporting funds,” listing each fund’s name, sub-fund reference, ISIN, SEDOL, and CUSIP so you can match it precisely against your holding.³

If it isn’t listed, the ERI rules don’t apply at all. Non-reporting funds follow a different, harsher regime, covered briefly further down.

Get the Numbers From the Report to Participants

Reporting funds must publish an annual “Report to Participants” for every UK-resident investor who held units at the end of the reporting period.⁴ Fund managers usually make it available on their website or investor portal.

You need two figures from that report:

The excess reportable income per unit, stated in the fund’s functional currency.
The ISIN, SEDOL, or CUSIP that identifies your specific share class.⁵

Multiply the per-unit figure by the number of units you held on the last day of the fund’s reporting period. That total, in the fund’s currency, is your ERI for that period.

Work Out Which UK Tax Year It Falls Into

ERI is not taxed on the day the fund’s accounting period ends. Regulation 94(4) of the Offshore Funds (Tax) Regulations 2009 sets the deemed distribution date at six months after the last day of the reporting period.² A fund with a 31 December year-end has a deemed distribution date of 30 June, which sits inside the UK tax year running to the following 5 April.

The lag is mechanical, so once you know the fund’s year-end you can map every future date in advance. One exception: if the excess reported income is recognised in your accounts before the six-month mark, that earlier date applies instead.

Getting the tax year wrong is one of the more common mistakes, and it can trigger interest charges even if the total tax paid is eventually correct.

Categorise the Income by Fund Type

ERI is not always treated as a dividend. HMRC’s HS265 helpsheet sets out four categories, and the fund manager’s report should tell you which one applies. If it doesn’t, the fund’s factsheet or prospectus will show the asset mix.¹

Company fund that is not a bond fund: report as a foreign dividend. This covers most equity-oriented offshore funds.
Company fund that is a bond fund (more than 60% of investments in interest-bearing assets): report as interest.
Transparent fund: the income keeps its original character, so you may have to split it between dividend, interest, and property income.
Non-transparent unit trust: report as miscellaneous income.

The category dictates both the SA106 box and the tax rate applied.

Enter It on SA106

The Foreign supplementary pages (SA106) are where ERI goes.⁶ Placement depends on the category:

Dividend income: “Dividends from foreign companies” on pages 2 and 3.
Interest from a bond fund: “Interest and other income from overseas savings” on pages 2 and 3.
Property income from a transparent fund: “Income from land and property abroad” on pages 4 and 5.
Miscellaneous income from a non-transparent unit trust: “Interest and other income from overseas savings” on pages 2 and 3.

These placements come from HS265.¹ Dividend income uses the £500 dividend allowance and the dividend rates of 8.75%, 33.75%, or 39.35% depending on your band. Interest and miscellaneous income use different allowances and rates, so putting income in the wrong box means paying the wrong tax.

Converting to Sterling

If the fund reports in a foreign currency, convert the total to sterling before entering it. Use the exchange rate for the deemed distribution date, not the date you fill in the form. HMRC publishes monthly exchange rates on GOV.UK that are acceptable for this purpose.

Claiming Double Taxation Relief

If the fund’s income was already taxed in the country where the fund is based, you may be able to claim double taxation relief on the SA106 to avoid being taxed twice. The Foreign pages have dedicated boxes for this. The amount available depends on the UK’s tax treaty with that country and the foreign tax actually paid.

Keep Records for When You Sell

Every pound of ERI you’re taxed on adds to the base cost of your units. Regulation 99 of the Offshore Funds (Tax) Regulations 2009 treats previously taxed ERI as expenditure on acquiring the holding, so it lifts your acquisition cost and reduces the capital gain on disposal.⁷ Without that uplift, you’d pay income tax on ERI each year and then capital gains tax on the same amount when you sold.

Keep a running schedule showing each year’s ERI, the exchange rate used, and the sterling amount added to your base cost. If you can’t evidence those figures at disposal, you may end up overpaying capital gains tax with no easy way to recover it.

If the Fund Is Not a Reporting Fund

The steps above only apply to funds with reporting status. Gains on disposal of a non-reporting fund are treated as “offshore income gains” and taxed at your marginal income tax rate rather than the capital gains rate, and the annual CGT exemption doesn’t apply.¹ A higher-rate taxpayer can face 40% on the gain rather than the CGT rate. There is no ERI to report each year for non-reporting funds, but the disposal treatment is materially worse.

Why Getting This Right Matters

HMRC applies steeper penalties to offshore errors than to purely domestic ones. The penalty framework sorts countries into three categories, with higher maximum penalties for jurisdictions with weaker information-sharing arrangements with the UK: up to 100% of the tax owed for Category 1 territories, 150% for Category 2, and 200% for Category 3.⁸ Minimum penalties are higher again where HMRC contacts you before you come forward, and separate asset-based charges and the Failure to Correct regime can stack on top. Reporting ERI correctly each year, using the fund’s own numbers and the right SA106 boxes, is considerably cheaper than dealing with the alternative.

1
GOV.UK. HS265 Offshore Funds
2
Legislation.gov.uk. The Offshore Funds (Tax) Regulations 2009 – Regulation 94
3
GOV.UK. Approved Offshore Reporting Funds
4
GOV.UK. IFM12622 – Offshore Funds: Reporting Funds: Reporting Obligations: Reports to Participants: General
5
HM Revenue and Customs. Offshore Funds – Annual Reporting Requirements for Reporting Funds
6
GOV.UK. Self Assessment: Foreign (SA106)
7
HM Revenue & Customs. IFM13373 – Offshore Funds: Participants in Offshore Funds: Participants Within the Charge to Income Tax: Disposals: Reporting Funds: Example
8
GOV.UK. Compliance Checks – Penalties for Offshore Non-Compliance (CC/FS17)