Collective investment schemes: offshore funds: offshore income gains: share identification
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.
Shares or units which constitute a material interest in non-qualifying offshore funds are `relevant securities’ within TCGA92/S108 and are therefore outside the pooling provisions (CG51150) (SAIM20000).
Shares or units are, however, pooled where they were acquired on or after 6 April 1982 (1 April 1982 for companies) in a fund which either
- has held distributing fund status at all times since 1 January 1984, or
- in the case of a previously non-qualifying fund, were acquired after it had obtained distributing fund status.
Such shares or units comprise a `new holding’ (CG50590).
Where a taxpayer who has held shares or units in a non-qualifying offshore fund subsequently acquires further shares or units in the same fund after the fund has obtained distributing status, he will then have a composite holding comprising, for tax purposes -
- `relevant securities’ held when the fund did not have distributing status, and
- a `new holding’ of pooled shares acquired after the fund obtained distributor status.
There are no specific statutory provisions as to the order of identification for disposals of shares out of such a composite holding.
Such a disposal could be identified with `relevant securities’ and the `new holding’ of pooled shares proportionally to the number of shares in each holding.
However, it might prove cumbersome for computations to be carried out on the basis of such a mixed rule of identification.
It would be acceptable for a ‘last in, first out’ (LIFO) approach to be adopted. If this practice is followed, disposals will first be identified with pooled shares. The effect of this will usually be to delay any offshore income gain charge until all pooled shares have been disposed of and further disposals are identified with `relevant securities’.
It would be equally acceptable to prepare computations on the basis that disposals shall first be identified with `relevant securities’ following the statutory identification rules in TCGA92/S108.
Whichever method is chosen should be followed consistently.