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Investment undertakings and certain offshore funds: taxation of personal portfolio investment undertakings.
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40.— (1) The Principal Act is amended—
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(a) by inserting the following after section 739B:
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“Personal portfolio investment undertaking.
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739BA.— (1) In this section—
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‘ investor ’ means—
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(a) in relation to an investment undertaking, a unit holder in the investment undertaking who is an individual, and
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(b) in relation to an offshore fund to which Chapter 4 applies, an individual who has a material interest in the offshore fund;
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‘ land ’ has the same meaning as in section 730BA;
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‘ material interest ’ shall be construed in accordance with section 743;
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‘ offshore fund ’ has the meaning assigned to it by section 743;
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‘ public ’ has the same meaning as in section 730BA.
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(2) In this Chapter and in Chapter 4 of this Part ‘ personal portfolio investment undertaking ’ means—
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(a) in relation to an investor in an investment undertaking, an investment undertaking, and
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(b) in relation to an investor in an offshore fund to which Chapter 4 applies, such an offshore fund,
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under the terms of which some or all of the property of the undertaking or, as the case may be, the offshore fund, may be, or was, selected by, or the selection of some or all of the property may be, or was, influenced by—
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(i) the investor,
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(ii) a person acting on behalf of the investor,
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(iii) a person connected with the investor,
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(iv) a person connected with a person acting on behalf of the investor,
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(v) the investor and a person connected with the investor, or
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(vi) a person acting on behalf of both the investor and a person connected with the investor,
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where ‘ person connected ’ in this subsection means a person connected within the meaning of section 10.
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(3) For the purposes of subsection (2) and without prejudice to the application of that subsection, the terms of an investment undertaking or an offshore fund, as the case may be, shall be treated as permitting the selection referred to in that subsection where—
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(a) the terms of such undertaking or offshore fund, or any other agreement between any person referred to in that subsection and such undertaking or offshore fund concerned—
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(i) allow the exercise of an option by any person referred to in that subsection to make the selection referred to in that subsection,
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(ii) give such undertaking or offshore fund discretion to offer any person referred to in that subsection the right to make the selection referred to in that subsection, or
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(iii) allow any of the persons referred to in that subsection the right to request, subject to the agreement of such undertaking or offshore fund, a change in those terms such that the selection referred to in that subsection may be made by any of those persons,
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or
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(b) the investor is unable under those terms to select any of the property but any of the persons referred to in that subsection has or had the option of requiring such undertaking or offshore fund to appoint an investment advisor (no matter how such a person is described) in relation to the selection of the property.
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(4) An investment undertaking or an offshore fund, as the case may be, is not a personal portfolio investment undertaking if—
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(a) the only property which may be or has been selected satisfies the condition specified in subsection (5), and
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(b) the terms under which such undertaking or offshore fund is offered meet the requirements of subsection (6).
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(5) The condition specified in this subsection is that at the time when the property is or was available to be selected the opportunity to select—
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(a) in the case of land, that property, and
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(b) in any other case, property of the same description as the first-mentioned property,
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is or was available to the public on terms which provide or provided that the opportunity to select the property is or was available to any person falling within the terms of the opportunity and that opportunity is or was clearly identified to the public, in marketing or other promotional literature published at that time by the investment undertaking or offshore fund concerned, as available generally to any person falling within the terms of the opportunity.
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(6) The requirements of this subsection are that—
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(a) the investment undertaking or offshore fund concerned does not subject any person to any treatment in connection with the opportunity which is different or more burdensome than any treatment to which any other person is or may be subject, and
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(b) where the terms of the opportunity referred to in subsection (5) include terms—
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(i) which set out the capital requirement of the opportunity and this requirement is identified to the public in the marketing or other promotional material published by the investment undertaking or offshore fund at the time the property is available to be selected, and
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(ii) indicating that 50 per cent or more by value of the property referred to in that subsection is or is to be land,
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then the amount any one person may invest in the investment undertaking or offshore fund shall not represent more than 1 per cent of the capital requirement (exclusive of any borrowings) of the opportunity as so identified.”,
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(b) in section 739E, by substituting the following for paragraphs (a) and (b) of subsection (1):
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“(a) subject to paragraph (ba), where the amount of the gain is provided by section 739D(2)(a), at the standard rate for the year of assessment in which the gain arises,
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(b) subject to paragraph (ba), where the chargeable event happens on or after 1 January 2001 and the amount of the gain is provided by paragraph (b), (c), (d), (dd) or (ddd) of section 739D(2), at a rate determined by the formula—
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(S + 3) per cent,
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where S is the standard rate per cent (within the meaning of section 4),
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(ba) where in the case of a personal portfolio investment undertaking, the chargeable event happens on or after 20 February 2007, at a rate determined by the formula—
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(S + 23) per cent,
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where S is the standard rate per cent (within the meaning of section 4), and”,
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(c) in section 747D, by substituting the following for paragraph (a):
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“(a) where the person is not a company, and—
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(i) the income represented by the payment is correctly included in a return made by the person, then notwithstanding section 15, the rate of income tax to be charged on the income shall be—
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(I) where the payment is a relevant payment—
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(A) in the case of an offshore fund which is a personal portfolio investment undertaking, at the rate determined by the formula—
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(S + 23) per cent,
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where S is the standard rate per cent for the year of assessment in which the payment is made, and
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(B) in any other case, the standard rate per cent,
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and
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(II) where the payment is not a relevant payment and is not made in consideration of the disposal of an interest in the offshore fund—
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(A) in the case of an offshore fund which is a personal portfolio investment undertaking, at the rate determined by the formula—
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(S + 23) per cent,
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where S is the standard rate per cent for the year of assessment in which the payment is made, and
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(B) in any other case, at the rate determined by the formula—
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(S + 3) per cent,
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where S is the standard rate per cent,
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and
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(ii) where the income represented by the payment is not correctly included in a return made by the person, the income shall be charged to income tax—
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(I) in the case of an offshore fund which is a personal portfolio investment undertaking, at the rate determined by the formula—
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(H + 20) per cent,
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where H is the rate per cent determined in relation to the person by section 15 for the year of assessment in which the payment is made, and
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(II) in any other case, at a rate determined by section 15,”,
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and
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(d) in section 747E, by substituting the following for subsection (1):
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“(1) Where on or after 1 January 2001 a person who has a material interest in an offshore fund, disposes of an interest in the offshore fund and the disposal gives rise to a gain computed in accordance with subsection (2) then, notwithstanding sections 745 and 747, where the gain is not taken into account in computing the profits or gains of a trade carried on by a company, the amount of that gain shall be treated as an amount of income chargeable to tax under Case IV of Schedule D, and—
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(a) where the person is a company, the rate of corporation tax to be charged on that income shall, notwithstanding section 21A(3), be the rate of income tax chargeable on income referred to in subparagraph (ii) of paragraph (b), and
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(b) where the person is not a company, and the person has correctly included details of the disposal in a return made by the person, the rate of income tax to be charged on that income shall, notwithstanding section 15, be the rate determined—
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(i) in the case of an offshore fund which is a personal portfolio investment undertaking, by the formula—
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(S + 23) per cent,
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where S is the standard rate per cent for the year of assessment in which the payment is made, and
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(ii) in any other case, by the formula—
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(S + 3) per cent,
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where S is the standard rate per cent.”.
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(2) Subsection (1) applies as respects—
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(a) the occurrence of a chargeable event in relation to an investment undertaking (within the meaning of Chapter 1A of Part 27 of the Principal Act),
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(b) the receipt by a person of a payment in respect of a material interest in an offshore fund (within the meaning of Chapter 4 of Part 27 of the Principal Act), and
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(c) the disposal in whole or in part of a material interest in an offshore fund (within that meaning),
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on or after 20 February 2007.
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