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HMRC internal manual

Offshore Funds Manual

From
HM Revenue & Customs
Updated
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Transitional rules: existing fund becomes non-reporting fund on 1 December 2009 - Schedule 1 para (2)

Paragraph (2) of Schedule 1 makes it clear that if an investor holds an interest in a fund on 1 December 2009 that came within the definition at section 756A ICTA and also comes within the definition at section S355 TIOPA 2010 from that date then, if the fund becomes a non-reporting fund at that (or any later) date and an investor subsequently disposes of an interest in the fund then any gain on the disposal will be taxed as an offshore income gain in respect of the entire period that the investor held the interest in the fund.

Where the fund was previously a non-distributing fund for the purposes of Chapter 5 of Part 17 of ICTA then this will not result in any change to the tax treatment of the investor on a disposal of their interest. However, where the fund was previously a distributing fund there could be an adverse effect for the investor if the fund does not then successfully apply for reporting fund status. There are therefore further provisions within Paragraph (3) of Schedule 1 that may apply - see OFM32400.