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HMRC internal manual

Offshore Funds Manual

HM Revenue & Customs
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Investors in non-reporting funds: exceptions to the charge to tax: general

The purpose of the offshore fund regime is to ensure that income cannot be rolled up free of tax with any subsequent gain on disposal being taxed only as a capital gain. Both the 1984 and 2009 rules achieve this by charging any gains on disposals of interests in arrangements that do not distribute, or report income, to tax as income (‘offshore income gains’, or ‘OIGs’).

However, where it is not possible to roll-up income in such a way that it would not be taxed as income then there is no need to apply the offshore funds rules. This may be the case where a tax charge is imposed by other parts of the Tax Acts on income arising from an investment in arrangements that may come within the definition of an offshore fund. There are also other circumstances where it would not be desirable to charge a disposal of an interest in an offshore fund to tax as an OIG. The Offshore Funds (Tax) Regulations 2009 therefore set out specifically when a charge to tax on an OIG will not arise. Most of the exceptions are carried forward from the legislation in ICTA that applied to the 1984 regime.

The following pages provide guidance on the exceptions in the regulations.