Finance Act, 1990

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Offshore funds operating equalisation arrangements.

64.—(1) For the purposes of this Chapter, an offshore fund operates equalisation arrangements if, and at a time when, arrangements are in existence which have the result that where—

(a) a person acquires by way of initial purchase a material interest in the fund at some time during a period relevant to the arrangements, and

(b) the fund makes a distribution for a period which begins before the date of his acquisition of that interest,

the amount of that distribution which is paid to him (assuming he still is retaining that interest) will include a payment of capital which is debited to an account (hereafter in this Chapter and the Fifth and Sixth Schedules referred to as “the equalisation account”) maintained under the arrangements and which is determined by reference to the income which had accrued to the fund at the date of his acquisition.

(2) For the purposes of this section, a person acquires an interest in an offshore fund by way of initial purchase if—

(a) his acquisition is by way of subscription for or allotment of new shares, units or other interests issued or created by the fund, or

(b) his acquisition is by way of direct purchase from the persons concerned with the management of the fund and their sale to him is made in their capacity as managers of the fund.

(3) Without prejudice to section 63 (1), this Chapter applies, subject to the following provisions of this section, to a disposal by any person of an asset if—

(a) at the time of the disposal, the asset constitutes a material interest in an offshore fund which at that time is operating equalisation arrangements,

(b) the fund is not and has not at any material time (within the meaning of section 63 (7)) been a non-qualifying offshore fund, and

(c) the proceeds of the disposal do not fall to be taken into account as a trading receipt.

(4) This Chapter shall not, by virtue of subsection (3), apply to a disposal if—

(a) it takes place during such a period as is mentioned in subsection (1) (a), and

(b) throughout so much of that period as precedes the disposal, the income of the offshore fund concerned has been of such a nature as is referred to in paragraph 3 (1) of the Fifth Schedule .

(5) An event which, apart from paragraph 2 (2) of Schedule 2 to the Principal Act, would constitute a disposal of an asset shall constitute such a disposal for the purpose of determining whether, by virtue of subsection (3), there is a disposal to which this Chapter applies.

(6) The reference in subsection (5) to paragraph 2 (2) of Schedule 2 to the Principal Act shall be deemed to include a reference to that paragraph as applied by paragraphs 2A or 4 of that Schedule but not as applied by paragraph 3 of that Schedule.