PART XVII TAX AVOIDANCE

CHAPTER V OFFSHORE FUNDS

Charge to tax of offshore income gains

761 Charge to income tax or corporation tax of offshore income gain.

M11

If a disposal to which this Chapter applies gives rise in accordance with section 758 F1or Schedule 28 to an offshore income gain, then, subject to the provisions of this section, the amount of that gain shall be treated for all the purposes of the Tax Acts as—

a

income arising at the time of the disposal to the person making the disposal, and

b

constituting profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the disposal is made.

2

Subject to subsection (3) below, sections F22(1) and 10 of the 1992 Act (persons chargeable to tax in respect of chargeable gains) and section 11(2)(b) shall have effect in relation to income tax or corporation tax in respect of offshore income gains as they have effect in relation to capital gains tax or corporation tax in respect of chargeable gains.

3

In the application of section F210 of the 1992 Act in accordance with subsection (2) above, paragraphs (a) and (b) of subsection (1) of that section (which define the assets on the disposal of which chargeable gains are taxable) shall have effect with the omission of the words “situated in the United Kingdom and”F3and subsection (3) of that section (which makes similar provision in relation to corporation tax) shall have effect with the omission of the words “situated in the United Kingdom”.

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5

In the case of individuals resident or ordinarily resident but not domiciled in the United Kingdom, section F212 of the 1992 Act (which provides for taxation on a remittance basis) shall have effect in relation to income tax chargeable by virtue of subsection (1) above on an offshore income gain as it has effect in relation to capital gains tax in respect of gains accruing to such individuals from the disposal of assets situated outside the United Kingdom.

6

A charity shall be exempt from tax in respect of an offshore income gain if the gain is applicable and applied for charitable purposes; but if property held on charitable trusts ceases to be subject to charitable trusts and that property represents directly or indirectly an offshore income gain, the trustees shall be treated as if they had disposed of and immediately reacquired that property for a consideration equal to its market value, any gain (calculated in accordance with Schedule 28) accruing being treated as an offshore income gain not accruing to a charity.

  • In this subsection “charity” has the same meaning as in section 506 and “market value” has the same meaning as in the F21992 Act.

7

In any case where—

a

a disposal to which this Chapter applies is a disposal of settled property, within the meaning of the F21992 Act, and

b

for the purposes of the F21992 Act, the general administration of the trusts is ordinarily carried on outside the United Kingdom and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the United Kingdom,

subsection (1) above shall not apply in relation to any offshore income gain to which the disposal gives rise.