Taxes Consolidation Act 1997 section 741

Disposals of material interests in non-qualifying offshore funds

Section 741 sets out when the offshore funds chapter applies to a disposal of a material interest in a non-qualifying (non-distributing) offshore fund, and modifies certain capital gains tax rules to prevent avoidance of the income tax charge.

• The chapter applies to disposals of material interests in offshore funds that were non-qualifying (non-distributing) at any time on or after 6 April 1990, and to funds that came onshore on or after 1 January 1991.
• A disposal has the same meaning as for capital gains tax purposes, but with two key modifications: death is treated as an occasion of charge, and share-for-share exchange rules are disapplied where they would otherwise allow avoidance of the charge.
• On death, the deceased is deemed to have disposed of the material interest at market value immediately before death, and the resulting gain is taxed as pre-death income; other CGT death provisions (allowable losses, deeds of family arrangement within two years) continue to apply.
• Where shares in a non-qualifying offshore fund are exchanged for shares in an acquiring company that is not such a fund (on a takeover, reconstruction, or amalgamation), the exchange is treated as a disposal at market value rather than being disregarded under the normal paper-for-paper rules.