Finance Act 2004

2 (1) In paragraph 5(3) of Schedule 27 to the Taxes Act 1988 (offshore funds: assumptions to be made in computing UK equivalent profits), after paragraph (d) (inserted by paragraph 1 above) insert— “and U.K.

(e) that the provisions of the Corporation Tax Acts relating to profits or losses arising from a derivative contract (within the meaning of Schedule 26 to the Finance Act 2002) apply as if the offshore fund were an authorised unit trust.”

(2) Paragraph 35 of Schedule 26 to the Finance Act 2002 (c. 23) (assumptions to be made in relation to derivative contracts) shall cease to have effect.

(3) In relation to a fund established on or before the day on which this Act is passed, this paragraph only has effect if an election that it should have effect has been made by or on behalf of the fund.

(4) Any such election—

(a) must be made by notice to an officer of the Board, in such form and within such time as the Board may determine, and

(b) is irrevocable.

(5) For the purpose of determining the United Kingdom equivalent profits of an offshore fund for the first account period of the fund in relation to which this paragraph has effect—

(a) any profits or losses arising from a derivative contract that were taken into account in determining the United Kingdom equivalent profits of the fund for the preceding account period shall be disregarded, and

(b) any profits or losses arising from a derivative contract that—

(i) arose in, or in respect of, the preceding account period, but

(ii) were not taken into account in determining the United Kingdom equivalent profits of the fund for that period,

shall be taken into account.

(6) In this paragraph—

• “derivative contract” has the same meaning as in Schedule 26 to the Finance Act 2002;

• “United Kingdom equivalent profits” has the meaning given in paragraph 5 of Schedule 27 to the Taxes Act 1988.