Taxes Consolidation Act 1997 Schedule 20 paragraph 6

Offshore fund operating equalisation arrangements

Paragraph 6 of Schedule 20 sets out how the offshore income gain arising on a disposal of a material interest in an offshore fund operating equalisation arrangements is calculated, including adjustments for the investor's period of ownership and for commodity-related income.

• Where an investor disposes of an interest in a distributing offshore fund that is an equalisation fund, the offshore income gain equals the equalisation element relevant to the asset disposed of — broadly, the income accrued to the disposal date that would be credited to the fund's equalisation account if a new investor acquired the interest at that point.
• The equalisation element is reduced where the investor acquired the interest after the start of the accrual period, so that only income accruing during the investor's actual ownership period is charged; where the interest was acquired before 6 April 1990, only income accruing from that date onwards is taxable.
• Where the investor acquired the interest before both the start of the accrual period and 6 April 1990, the equalisation element is similarly reduced to cover only the income accruing from 6 April 1990 to the disposal date.
• To the extent that the equalisation element includes income from commodity dealing, 50 per cent of that commodity-related accrued income is disregarded when computing the chargeable equalisation element.