PART XVII TAX AVOIDANCE

CHAPTER V OFFSHORE FUNDS

Charge to tax of offshore income gains

F1762AExchange of interests of different classes

1

This section applies where—

a

classes of interest in an offshore fund (the “main fund”) are treated as separate offshore funds under section 756C; and

b

as the result of—

i

a reorganisation within the meaning of section 126 of the 1992 Act, or

ii

a conversion of securities within the meaning of section 132 of that Act,

a person exchanges an interest of one class (A) in the main fund for an interest of another class (B) in that fund.

2

Where—

a

the interest of class A—

i

is at the time of the exchange an interest in a non-qualifying offshore fund, or

ii

has been an interest in such a fund at any material time, and

b

the interest of class B is at the time of the exchange an interest in a fund which is certified by the Board as a distributing offshore fund,

section 127 of the 1992 Act (equation of original shares and new holding) shall not prevent the exchange constituting a disposal for the purposes of this Chapter.

3

Any such disposal shall be treated as a disposal for a consideration equal to the market value of the rights at the time of the exchange.

4

In this section—

  • “class of interest” has the same meaning as in section 756C(1);

  • “material time” has the same meaning as in section 757.