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HMRC internal manual

Offshore Funds Manual

Investors in non-reporting funds: deduction of offshore income gains in computing capital gains: consideration on a reorganisation (S128 TCGA) - Regulation 47

Where there is a disposal which gives rise to an offshore income gain and that disposal arises as a result of —

  • regulation 35 (application of section 135 of TCGA 1992: exchange of securities for those in another company - see OFM14400),
  • regulation 36 (application of section 136 of TCGA 1992: reconstruction or amalgamation involving issue of securities - see OFM14500), or
  • regulation 37 (exchange of interests of different classes - see OFM14600).

then TCGA 1992 has effect as if an amount equal to the offshore income gain to which that disposal gives rise were given (by the person making the exchange) as consideration for the new holding (within the meaning of section 128 of TCGA (consideration given or received for new holding on a reorganisation)).

The effect of this is to treat the offshore income gain (for TCGA purposes) as additional consideration given for the original holding, thus reducing the eventual gain on disposal of the new holding by the amount of the offshore income gain (see section 128 TCGA).