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The definition of what constitutes an offshore fund is not to be changed
in this year’s Finance Bill. Discussions with industry will continue
regarding this and a new revised definition will be included in the 2009
Finance Bill.
Legislation is to be introduced in the Finance Bill to enable regulations to
be made concerning offshore funds.
The regulations will result in a relaxation to qualifying offshore funds.
These are funds where capital gains treatment applies to a disposal instead
of the generally less advantageous income tax treatment. In order to be a
qualifying the fund has had to distribute at least 85% of its income
annually.
In the future, the fund will not be required to actually distribute income
but to provide its investors with a report of its income. The investors will
be taxed on the reported amount.
It is expected that other conditions for qualifying fund status will be less
onerous and that minor transgressions will not result in loss of that
status.
Our view
These changes and continuing consultation are generally welcome. Whilst
a qualifying offshore fund may not be required to distribute income in
the future, in practice it is likely to choose to do so to prevent the
same value being taxed twice. First as income as it arises and secondly
as part of the capital gains proceeds on a disposal. |
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