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HMRC internal manual

Savings and Investment Manual

From
HM Revenue & Customs
Updated
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Collective investment schemes: offshore funds: offshore income gains

Offshore income gains

The information in this manual applies to transactions up to 30 November 2009. The Offshore Funds Manual is currently being updated for the offshore funds regime from 1 December 2009.

The gain chargeable under Schedule D Case VI (companies) and ITTOIA05/PT5/CH8 (individuals) is known as an ‘offshore income gain’. There are two types of offshore income gain:

  • the gain arising on the disposal of an interest in a non-qualifying fund, and
  • the gain arising on the disposal of an interest in a distributing fund that operates equalisation arrangements.

Computation

To determine the amount of the offshore income gain the taxpayer calculates the ‘unindexed gain’.

The ‘unindexed gain’ is the gain on the disposal for chargeable gains purposes but without the benefit of any indexation allowance or taper relief available under TCGA92 either on the current disposal or on any earlier disposal of the interest on a no gain/no loss basis in an unbroken sequence of such disposals. See SAIM6340 for the rules applying to company reconstructions.

The ‘unindexed gain’ should also be computed without regard to any relief due under TCGA92/S162, TCGA92/S165 or TCGA92/S260.

Where the disposal gives rise to a loss the unindexed gain, and, consequently, the offshore income gain, is nil.

The loss is not a loss for the purposes of the offshore fund rules but arises from a capital transaction. Any unindexed loss arising is, therefore, a capital loss available for set-off or carry-forward under TCGA 1992 rules.