Revenue Note for Guidance

747E Disposal of an interest in offshore fund

Summary

This section sets out the treatment, for tax purposes, of a disposal of an interest in the off-shore funds to which the Chapter applies. It also covers the deemed disposal of a material interest at the ending of each period of 8 years beginning with the acquisition of the interest.

Details

(1) Subject to subsection (1A), where an individual has an interest in an offshore fund to which the Chapter applies, and disposes of the whole or part of that interest, then the amount of the gain on disposal, if correctly included in a timely return, will be liable to income tax at the relevant rate specified in the following Table:

Chargeable event arising —	Gains (excluding PPIUs)	*PPIU – see section 739BA* – applicable from 20 February 2007**
Before 1 January 2009	Standard rate of income tax (20%) plus 3%	Standard rate of income tax (20%) plus 23%
Between 1 January 2009 and 7 April 2009	Standard rate of income tax (20%) plus 6%	Standard rate of income tax (20%) plus 26%
Between 8 April 2009 and 31 December 2010	28%	Standard rate of income tax (20%) plus 28%
Between 1 January 2011 and 31 December 2011	30%	Standard rate of income tax (20%) plus 30%
Between 1 January 2012 and 31 December 2012	33%	Standard rate of income tax (20%) plus 33%
Between 1 January 2013 and 31 December 2013	36%	Standard rate of income tax (20%) plus 36%
Between 1 January 2014 and 31 December 2014	41%	60%
On or after 1 January 2015	41%	60%*

* With effect from 1 January 2015, any gain from a PPIU which is not correctly included in a return, will be liable at the rate of 80%.

In the case of a company disposing of an interest in such an offshore fund, the company is taxed on any payment or gain arising from its investment at the corporation tax trading rate where that company is carrying on a financial trade and the investment is part of its trading stock. Otherwise the gain is chargeable to tax under Case IV of schedule D.

(1A) This subsection defines “umbrella scheme” as an offshore fund which is divided into a number of sub-funds and in which persons who have a material interest in one sub-fund are entitled to exchange the whole or part of that interest for a material interest in another subfund of that umbrella scheme. Such exchanges are not disposals for the purposes of subsection (1).

(2) to (4) The gain on the disposal of an interest in an offshore fund is computed on the same basis as it would be for capital gains tax purposes but without regard to indexation relief. Furthermore, the amount of gain, that is to be taxed as income, cannot be sheltered by trading or other losses, nor can it be of a negative amount. Where a gain is treated as nil and tax was chargeable in respect of an earlier deemed disposal of the material interest, the overpaid amount is refundable/available for set-off.

(5) The amount of any income tax paid by an individual on an amount of gain generated by the disposal of an interest in an offshore fund is treated as being that amount of capital gains tax for the purposes of section 104 of the Capital Acquisitions Tax Consolidation Act 2003. Under that section where an event constitutes both a disposal of an asset for capital gains tax purposes and also gives rise to a CAT liability in respect of property, the capital gains tax paid is allowed as a credit against the net gift or inheritance tax.

Deemed disposal/reacquisition of material interest in offshore fund

(6) There is a deemed disposal and reacquisition of a material interest in an offshore fund at the ending of each period of 8 years beginning with the acquisition of the interest and each subsequent 8-year period. For the purposes of the section, the person is deemed to have disposed of his/her material interest immediately before the ending of the period and to have immediately reacquired it at market value at that time.

Relevant Date: Finance Act 2021