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HMRC internal manual

Offshore Funds Manual

Investors in non-reporting funds: exceptions to the charge to tax: rights in certain existing holdings - Regulation 30

Some UK investors will have acquired rights before the definition of an offshore fund at section S355(1) TIOPA 2010 took effect on 1 December 2009, and those rights may not have constituted a ‘material interest’ in an offshore fund (within the meaning of section 759 ICTA) under the 1984 offshore funds regime. Such investors may have invested on the understanding that any gains arising would be charged to either capital gains tax or to corporation tax as a capital gain.

In order to preserve the treatment that such investors expected when they acquired their interests, where such interests are disposed of then any gain arising on disposal will not be taxed as an offshore income gain provided that -

  • the rights were acquired before 1st December 2009, or
  • the rights were acquired on or after 1 December 2009 but in accordance with a legally enforceable agreement in writing that was entered into by the investor before 30th April 2009 (the publication date for Finance Bill 2009).

If the agreement was conditional, the conditions must have been met before 1 December 2009 and not varied on or after that date.

See OFM17600 for the rules that apply when an investor holds such grandfathered interests and acquires further interests in the same fund which themselves are subject to the regulations.