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HMRC internal manual

Offshore Funds Manual

Investors in non-reporting funds: deduction of offshore income gains in computing capital gains: treatment of the disposal - general - Regulation 45

Where there is a disposal of an interest in an offshore fund which has given rise to an offshore income gain and which would also be a disposal for the purposes of TCGA 1992 (as is likely to be the case), then without some form of deduction for the sum charged as an offshore income gain there could be a double charge to tax (one on income, and one on gains).

Section 37(1) TCGA 1992 gives relief where the consideration for a disposal of assets has been subject to a charge to tax on income in other circumstances, and regulation 45 has effect in substitution for that part of TCGA so that an offshore income gain is deducted from the sum that would otherwise be taken as the value of the consideration on disposal for TCGA purposes. In many cases this will eliminate any charge to tax on a capital gain.

Where there is a part-disposal so that section 42 of TCGA applies to determine the apportionment of acquisition costs to the disposal then the full amount of disposal consideration is taken into account for the purposes of the calculation required by that section - that is, the offshore income gain is not deducted from the disposal consideration for the purposes of calculating the part disposal fraction at section 42(2) (for further details relating to part-disposals see the Capital Gains Manual available on the HMRC website at