PART XVII TAX AVOIDANCE
CHAPTER V OFFSHORE FUNDS
Material interests in non-qualifying offshore funds
758 Offshore funds operating equalisation arrangements
M1(1)
For the purposes of this Chapter, an offshore fund operates equalisation arrangements if, and at a time when, arrangements are in existence which have the result that where—
(a)
a person acquires by way of initial purchase a material interest in the fund at some time during a period relevant to the arrangements; and
(b)
the fund makes a distribution for a period which begins before the date of his acquisition of that interest;
the amount of that distribution which is paid to him (assuming him still to retain that interest) will include a payment of capital which is debited to an account maintained under the arrangements (“the equalisation account”) and which is determined by reference to the income which had accrued to the fund at the date of his acquisition.
(2)
For the purposes of this section, a person acquires an interest in an offshore fund by way of initial purchase if—
(a)
his acquisition is by way of subscription for or allotment of new shares, units or other interests issued or created by the fund; or
(b)
his acquisition is by way of direct purchase from the persons concerned with the management of the fund and their sale to him is made in their capacity as managers of the fund.
(3)
Without prejudice to section 757(1), this Chapter applies, subject to the following provisions of this section, to a disposal by any person of an asset if—
(a)
at the time of the disposal, the asset constitutes a material interest in an offshore fund which at that time is operating equalisation arrangements; and
(b)
the fund is not and has not at any material time (within the meaning of section 757(7)) been a non-qualifying offshore fund; and
(c)
the proceeds of the disposal do not fall to be taken into account as a trading receipt.
(4)
This Chapter does not, by virtue of subsection (3) above, apply to a disposal if—
(a)
it takes place during such a period as is mentioned in subsection (1)(a) above; and
(b)
throughout so much of that period as precedes the disposal, the income of the offshore fund concerned has been of such a nature as is referred to in paragraph 3(1) of Schedule 27.
(5)
An event which, apart from section F1127 of the 1992 Act (reorganisations etc.), would constitute a disposal of an asset shall constitute such a disposal for the purpose of determining whether, by virtue of subsection (3) above, there is a disposal to which this Chapter applies.
(6)
F3(7)
The Treasury may make provision by regulations as to the application of the provisions of this section in relation to—
(a)
a part of an umbrella fund which is treated as an offshore fund under section 756B, or
(b)
a class of interest in an offshore fund which is treated as an offshore fund under section 756C.
(8)
Regulations under subsection (7) may—
(a)
make different provision for different cases, and
(b)
include such supplementary, incidental, consequential or transitional provisions (including provisions modifying the effect of other enactments) as appear to the Treasury to be necessary or expedient.