Taxes Consolidation Act 1997 section 747E

Disposal of an interest in offshore funds

Section 747E sets out the tax treatment of a disposal (including a deemed disposal) of a material interest in an offshore fund, including the applicable tax rates, the computation of the gain, the treatment of losses, and the eight-yearly deemed disposal mechanism.

• A gain on disposal of a material interest in an offshore fund is charged to income tax under Schedule D Case IV at 38 per cent (or 60 per cent / 80 per cent for personal portfolio investment undertakings), with no indexation relief and no annual CGT exemption.
• Exchanges between sub-funds of the same umbrella scheme are not treated as disposals, but the original acquisition cost must be tracked for future disposal calculations.
• Losses on disposal are not allowable against any other gains, and trading or other losses cannot shelter the income charge; however, tax paid on an earlier deemed disposal may be refunded where a final disposal produces an overall loss.
• A material interest in an offshore fund is deemed to be disposed of and reacquired at market value on each eighth anniversary of its acquisition, triggering an exit tax charge at that point.