IFM13282 - Offshore Funds: participants in offshore funds: participants within the charge to corporation tax: disposals: non-reporting funds: overview

Overview - regulations 32 & 33 of SI 2009/3001

Where a participant has an interest in a non-reporting offshore fund (or in some circumstances in a reporting fund - see IFM13220 and IFM13320 onwards) then there is a disposal of an asset for the purposes of the Regulations if there would be a disposal of the asset for the purposes of tax on capital gains (under the Taxation of Chargeable Gains Act 1992 - ‘TCGA’).

Except where the Regulations provide otherwise (see IFM13430 concerning ‘protected rights’) the rules in TCGA also apply to determine the identity of disposals with acquisitions of rights within the same class.

Detailed guidance on disposals and on share identification rules when making a disposal for TCGA purposes can be found in the Capital Gains Manual. See CG51600+ for disposals chargeable to corporation tax. There are exceptions to the basic rule as summarised below.

Exceptions to basic rule - departures from rules in TCGA

  • Exchange of securities (section 135 TCGA) - see IFM13286
  • Scheme of reconstruction (Section 136 TCGA) - see IFM13286
  • Exchange of interests of different classes (section 127 TCGA) - see IFM13288

Offshore funds that are not companies

For the purposes of determining whether there has been a disposal or not, TCGA applies to interests in offshore funds that are not companies in the same way as it applies to interests in companies. This is because TCGA applies to interests in unit trusts and to other non-corporate offshore funds in the same way as it does to shares in companies.

See IFM12254 for further guidance on the rules relating to offshore funds that do not take corporate or unit trust form.

Some arrangements that come within the meaning of an offshore fund will not give rise to an offshore income gain when an investor disposes of an interest in the arrangements if tax is chargeable under other provisions of the Taxes Acts. This would include, for example, sums charged to tax under the loan relationships rules. Chapter 3 of The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) contains regulations setting out exceptions from the charge to an offshore income gain (see IFM13400 onwards).