Finance Act, 1990
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SIXTH SCHEDULE Offshore Funds: Computation of Offshore Income Gains | ||
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PART I Disposals of Interests in Non-Qualifying Funds | ||
Interpretation | ||
1. In this Part of this Schedule “material disposal” means a disposal to which Chapter VII of Part I of this Act applies, otherwise than by virtue of section 64 . | ||
Calculation of unindexed gain | ||
2. (1) Where there is a material disposal, there shall first be determined for the purposes of this Part of this Schedule the amount (if any) which, in accordance with the provisions of this paragraph, is the unindexed gain accruing to the person making the disposal. | ||
(2) Subject to subsections (3), (4), (5) and (6) of section 63 and paragraph 3, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of the Principal Act if it were computed— | ||
(a) without regard to any charge to income tax or corporation tax by virtue of section 67 , and | ||
(b) without regard to any adjustment (hereafter in this Part of this Schedule referred to as “the indexation allowance”), made under section 3 (1) of the Capital Gains Tax (Amendment) Act, 1978 , to sums allowable as deductions in the computation of chargeable gains. | ||
3. (1) If the material disposal forms part of a transfer to which paragraph 6 of Schedule 2 to the Principal Act applies, then the unindexed gain accruing on the disposal shall be computed without regard to any deduction which falls to be made under that paragraph in computing a chargeable gain. | ||
(2) Notwithstanding section 12 of the Principal Act if, apart from this subparagraph, the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil and, accordingly, for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal. | ||
Gains since the 6th day of April, 1990 | ||
4. (1) This paragraph applies where— | ||
(a) the interest in the offshore fund which is disposed of by the person making a material disposal was acquired by him before the 6th day of April, 1990, or | ||
(b) he is treated by virtue of any provision of subparagraph (3) and (4) as having acquired the interest before that date. | ||
(2) Where this paragraph applies, there shall be determined for the purposes of this Part of this Schedule the amount which would have been the gain on the material disposal— | ||
(a) on the assumption that, on the 6th day of April, 1990, the interest was disposed of and immediately reacquired for a consideration equal to its market value at that time, and | ||
(b) subject to that assumption, on the basis that the gain is computed in like manner as, under paragraphs 2 and 3, the unindexed gain on the material disposal is determined, | ||
and that amount is in paragraph 5 (2) referred to as “the gain since the 6th day of April, 1990”. | ||
(3) Where the person making the material disposal acquired the interest disposed of— | ||
(a) on or after the 6th day of April, 1990, and | ||
(b) in such circumstances that by virtue of any enactment other than section 3 (3) of the Capital Gains Tax (Amendment) Act, 1978 , he and the person from whom he acquired it (hereafter in this subparagraph and subparagraph (4) referred to as “the previous owner”) fell to be treated for the purposes of the Principal Act as if his acquisition were for a consideration of such an amount as would secure that, on the disposal under which he acquired it, neither a gain nor a loss accrued to the previous owner, | ||
then, the previous owner's acquisition of the interest shall be treated as his acquisition of it. | ||
(4) If the previous owner acquired the interest disposed of on or after the 6th day of April, 1990, and in circumstances similar to those referred to in subparagraph (3), then, his predecessor's acquisition of the interest shall be treated for the purposes of this paragraph as the previous owner's acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before the 6th day of April, 1990, or, as the case may be, until an acquisition on a material disposal on or after that date. | ||
The offshore income gain | ||
5. (1) Subject to subparagraph (2), a material disposal shall give rise to an offshore income gain of an amount equal to the unindexed gain on that disposal. | ||
(2) In any case where— | ||
(a) paragraph 4 applies, and | ||
(b) the gain since the 6th day of April, 1990 (as defined in paragraph 4 (2)) is less than the unindexed gain on the disposal, | ||
the offshore income gain to which the disposal gives rise shall be an amount equal to the gain since the 6th day of April, 1990 (as so defined). | ||
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PART II Disposals Involving an Equalisation Element | ||
6. (1) Subject to paragraph 7, a disposal to which Chapter VII of Part I applies by virtue of section 64 (3) shall give rise to an offshore income gain of an amount equal to the equalisation element relevant to the asset disposed of. | ||
(2) Subject to subparagraphs (4), (5) and (6), the equalisation element relevant to the asset disposed of by a disposal falling within subparagraph (1) shall be the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset which is disposed of were acquired by another person by way of initial purchase. | ||
(3) In the following provisions of this Part of this Schedule, a disposal falling within subparagraph (1) is referred to as a “disposal involving an equalisation element”. | ||
(4) Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, the amount which, apart from this subparagraph, would be the equalisation element relevant to that asset shall be reduced by the following amount, that is to say— | ||
(a) if that acquisition took place on or after the 6th day of April, 1990, the amount which, on that acquisition, was credited to the equalisation account of the offshore fund concerned in respect of accrued income or, as the case may be, would have been so credited if that acquisition had been an acquisition by way of initial purchase, and | ||
(b) in any other case, the amount which would have been credited to that account in respect of accrued income if that acquisition had been an acquisition by way of initial purchase taking place on the 6th day of April, 1990. | ||
(5) In any case where— | ||
(a) the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal at or before the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, and | ||
(b) that period began before the 6th day of April, 1990, and ends after that date, | ||
the amount which, apart from this subparagraph, would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in clause (a) above had been an acquisition by way of initial purchase taking place on the 6th day of April, 1990. | ||
(6) Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income (as mentioned in subparagraph (2), (3), (4) or (5)) represents profits from dealing in commodities, within the meaning of paragraph 4 of the Fifth Schedule , one half of that accrued income shall be left out of account in determining under those subparagraphs the equalisation element relevant to the asset disposed of by that disposal. | ||
7. (1) For the purposes of this Part of this Schedule, there shall be determined, in accordance with paragraph 8, the Part I gain (if any) on any disposal involving an equalisation element. | ||
(2) Notwithstanding anything in paragraph 6 above— | ||
(a) if there is no Part I gain on a disposal involving an equalisation element, that disposal shall not give rise to an offshore income gain, and | ||
(b) if, apart from this paragraph, the offshore income gain on a disposal involving an equalisation element would exceed the Part I gain on that disposal, the offshore income gain to which that disposal gives rise shall be reduced to an amount equal to that Part I gain. | ||
8. (1) On a disposal involving an equalisation element, the Part I gain, is the amount (if any) which, by virtue of Part I of this Schedule (as modified by subparagraphs (2) and (3)), would be the offshore income gain on that disposal if it were a material disposal within the meaning of that Part. | ||
(2) For the purposes only of the application of Part I of this Schedule to determine the Part I gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 64 shall have effect as if, in the said subsection (5), the words “by virtue of subsection (3) above” were omitted. | ||
(3) If a disposal involving an equalisation element is one which, by virtue of any enactment other than section 3 (3) of the Capital Gains Tax (Amendment) Act, 1978 , is treated for the purposes of the Principal Act as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part I gain (if any) on the disposal, that enactment shall be deemed not to apply to it (but without prejudice to the application of that enactment to any earlier disposal). |