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Link to original content: http://www.legislation.gov.uk/ukpga/2009/10/schedule/22/data.xml
http://www.legislation.gov.uk/ukpga/2009/10/schedule/22Finance Act 2009An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.texttext/xmlenStatute Law Database2024-06-11Expert Participation2024-05-24 SCHEDULESSCHEDULE 22Offshore fundsSection 44Part 1Meaning of “offshore fund”<Emphasis>FA 2008</Emphasis>1FA 2008 is amended as follows.2Before section 41 (tax treatment of participants in offshore funds) insert—Meaning of “offshore fund”40A1This section and sections 40B to 40G have effect for this group of sections.2“Offshore fund” means—aa mutual fund constituted by a body corporate resident outside the United Kingdom,ba mutual fund under which property is held on trust for the participants where the trustees of the property are not resident in the United Kingdom, orca mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom (but see subsection (3)).3Subsection (2)(c) does not include a mutual fund constituted by two or more persons carrying on a trade or business in partnership.4“This group of sections” means this section and sections 40B to 42A.5References to participants in arrangements (or a fund) are to persons taking part in the arrangements (or the arrangements constituting the fund), whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise (and references to participation in arrangements or a fund, however expressed, are to be read accordingly).6In this section—“body corporate” does not include a limited liability partnership;“co-ownership” is not restricted to the meaning of that term in the law of any part of the United Kingdom.Meaning of “mutual fund” <Abbreviation Expansion="Et cetera" xml:lang="la">etc</Abbreviation>40B1“Mutual fund” means arrangements with respect to property of any description, including money, that meet conditions A to C, subject to—asections 40C and 40D, andbthe exceptions made by or under sections 40E to 40G.2Condition A is that the purpose or effect of the arrangements is to enable the participants—ato participate in the acquisition, holding, management or disposal of the property, orbto receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.3Condition B is that the participants do not have day-to-day control of the management of the property.4For the purpose of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions.5Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to—athe net asset value of the property that is the subject of the arrangements, orban index of any description.6The Treasury may by regulations amend condition C.Umbrella arrangements40C1In the case of umbrella arrangements—aeach part of the umbrella arrangements is to be treated as separate arrangements (subject to section 40D), andbthe umbrella arrangements are to be disregarded.2“Umbrella arrangements” means arrangements which provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them.3References to a part of umbrella arrangements are to the arrangements relating to a separate pool.Arrangements comprising more than one class of interest40D1Where there is more than one class of interest in arrangements (the “main arrangements”)—athe arrangements relating to each class of interest are to be treated as separate arrangements, andbthe main arrangements are to be disregarded.2In relation to umbrella arrangements, “class of interest” does not include a part of the umbrella arrangements (but there may be more than one class of interest in a part of umbrella arrangements).Meaning of “mutual fund”: exceptions40E1Arrangements are not a mutual fund if—aunder the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis mentioned in condition C in section 40B only in the event of the winding up, dissolution or termination of the arrangements, andbcondition X or Y is met.2Condition X is that the arrangements are not designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements.3Condition Y is that—athe arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements, andbcondition Y1, Y2 or Y3 is met.4Condition Y1 is that none of the assets that are the subject of the arrangements are relevant income-producing assets.5Condition Y2 is that, under the terms of the arrangements, the participants in the arrangements are not entitled to the income from the assets that are the subject of the arrangements or any benefit arising from such income.6Condition Y3 is that—aunder the terms of the arrangements, after deductions for reasonable expenses, any income produced by the assets that are the subject of the arrangements is required to be paid or credited to the participants, andba participant who is an individual resident in the United Kingdom would be charged to income tax on the amounts paid or credited.7Condition Y is not met if the arrangements are designed to produce a return for participants that equates, in substance, to the return on an investment of money at interest.8For the purposes of this section, the fact that arrangements provide for a vote or other action that may lead to the winding up, dissolution or termination of the arrangements does not, by itself, mean that the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements.Meaning of “relevant income-producing assets”40F1“Relevant income-producing assets” means assets that produce income on which, if they were held directly by an individual resident in the United Kingdom, the individual would be charged to income tax (subject to the following provisions of this section).2An asset is not a relevant income-producing asset if the asset is hedged, provided that no income is expected to arise from—athe asset (taking account of the hedging), orbany product of the hedging arrangements.3Cash awaiting investment is not a relevant income-producing asset, provided that the cash, and any income that it produces while awaiting investment, is invested as soon as reasonably practicable in assets that are not relevant income-producing assets.Meaning of “mutual fund”: powers to vary exceptions40G1The Treasury may by regulations amend or repeal any provision of section 40E or 40F.2The Treasury may by regulations provide that arrangements are not a mutual fund—ain specified circumstances, orbif they are of a specified description.3Regulations under this section may include provision having effect in relation to the tax year and accounting periods current on the day on which the regulations are made.31Section 41 (tax treatment of participants in offshore funds) is amended as follows.2In subsection (2), omit the definition of “offshore fund” (and the “and” before it).3Omit subsections (3) to (9).41Section 42 (regulations under section 41: supplementary) is amended as follows.2In subsection (2), for paragraphs (a) and (b) substitute—aan offshore fund comprising a part of umbrella arrangements, andban offshore fund comprising arrangements relating to a class of interest in other arrangements (see section 40D).3In subsection (3), for the words from “may” to the end substitute, in particular— arepeal Chapter 5 of Part 17 of ICTA (offshore funds), andbmake provision consequential on the repeal of provisions of that Chapter.4In subsection (4)(e), insert at the end “and savings”.5For subsection (5) substitute—5Regulations under section 41 may, in particular, provide for provisions to have effect in relation to the tax year, or accounting periods, current on the day on which the regulations are made.6In subsection (6), for “and “offshore fund” have” substitute “ has ”.5After that section insert—Regulations: procedure42A1Regulations under this group of sections are to be made by statutory instrument.2The following regulations may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons—aregulations under section 40B(6),bregulations under section 40G(1), andcthe first regulations under section 41(1).3A statutory instrument containing any other regulations under this group of sections is subject to annulment in pursuance of a resolution of the House of Commons, unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.<Emphasis>Restriction on regulation-making power under section 41 of FA 2008</Emphasis>6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Part 2Application of <Acronym Expansion="Taxation of Chargeable Gains Act">TCGA</Acronym> 1992 to offshore funds<Emphasis>TCGA 1992</Emphasis>7TCGA 1992 is amended as follows.8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Accordingly, in the title of Part 3 and in the title of Chapter 3 of that Part, insert at the end “etc”.10In section 288(1) (interpretation), in the definition of “company”, for “section 99” substitute “ sections 99 and 103A ”.<Emphasis>Consequential provision</Emphasis>111In TMA 1970, in—asection 25(9) (issuing houses, stockbrokers, auctioneers, etc), andbsection 28(2) (non-resident companies and trusts),after “sections 99” insert “ , 103A ”.2In section 1165 of CTA 2010—ain subsection (1) for “section 99 of TCGA 1992 (application of that Act to unit trust schemes)” substitute “ sections 99 and 103A of TCGA 1992 (application of that Act to unit trust schemes and to certain offshore funds) ”, andbin subsection (3) for “section 99 of TCGA 1992” substitute “ sections 99 and 103A of TCGA 1992 ”.3In ITTOIA 2005—ain section 149(4) (taxation of amounts taken to reserves), at the end of paragraph (b) (before the “and”) insert—barights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992,, andbin section 150(8) (conversion etc of securities held as circulating capital), after paragraph (c) insert—carights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992,.4In section 834(5) of the Companies Act 2006 (investment company: condition as to holdings in other companies), in the definition of “company” and “shares”, after “sections 99” insert “ , 103A ”.5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .<Emphasis>Commencement: general</Emphasis>121The amendments made by this Part of this Schedule have effect in relation to the acquisition, holding and disposal of rights in a relevant offshore fund on or after the commencement day, subject to paragraphs 13 and 15.2In this paragraph and paragraphs 15 to 18 “the commencement day” means—ain relation to the acquisition, holding and disposal of rights by a person subject to the charge to capital gains tax, 1 December 2009, andbin relation to the acquisition, holding and disposal of rights by a person subject to the charge to corporation tax, such day as the Treasury may by order appoint.<Emphasis>Commencement: certain consequential amendments</Emphasis>131The amendment made by sub-paragraph (1)(a) of paragraph 11 comes into force on 1 December 2009 (and has effect as if section 103A of TCGA 1992 had effect from that date in relation to the issue, placing, acquisition, holding and disposal of rights in relevant offshore funds by any person).2The amendments made by sub-paragraphs (2), (4) and (5) of paragraph 11 come into force in accordance with an order made by the Treasury.<Emphasis>Commencement orders</Emphasis>141An order under paragraph 12(2)(b) or 13(2)—amay make different provision for different cases or different purposes, andbmay include transitional provision and savings.2Section 1171(4) of CTA 2010, section 287(3) of TCGA 1992 and section 1014(4) of ITA 2007 (orders etc subject to annulment) do not apply in relation to such an order.<Emphasis>Election modifying commencement</Emphasis>151This paragraph applies if a person makes an election—afor capital gains tax purposes, in respect of a relevant tax year, orbfor corporation tax purposes, in respect of a relevant accounting period.2The amendments made by this Part of this Schedule (other than the amendments made by paragraph 11(1)(a), (2), (4) and (5)) have effect, and are to be treated as always having had effect, in relation to the acquisition, holding and disposal by the person of rights in a relevant offshore fund on or after the first day of that tax year or accounting period (“the election day”).3Sub-paragraph (4) applies if, in respect of any time on or after the election day but before the commencement day, the relevant offshore fund was not certified as a distributing fund under Part 3 of Schedule 27 to ICTA (distributing funds: certification procedure).4The acquisition, holding or disposal by the person of rights in the fund at that time is to be treated as the acquisition, holding or disposal of rights in an offshore fund that is so certified.5In this paragraph and paragraph 16—“relevant accounting period” means an accounting period beginning on or after 1 April 2003 but before the day appointed under paragraph 12(2)(b);“relevant tax year” means the tax year 2003-04 and any subsequent tax year up to and including the tax year 2009-2010.<Emphasis>Making an election</Emphasis>161An election under paragraph 15 must be made—afor capital gains tax purposes, by being included in a relevant return under TMA 1970, andbfor corporation tax purposes, by being included in a relevant company tax return.2A return under TMA 1970 is relevant if it is for—athe tax year in respect of which the election is made, orba subsequent relevant tax year.3A company tax return is relevant if it is for—athe accounting period in respect of which the election is made, orba subsequent relevant accounting period.4The references in sub-paragraph (1) to an election being included in a return include an election being included by virtue of an amendment of the return.5An election under paragraph 15 is irrevocable.<Emphasis>Giving effect to elections</Emphasis>17If, in order to give effect to an election under paragraph 15, any adjustments are required, whether by the discharge or repayment of tax, the making of assessments or otherwise—athe adjustments must be made, andbany time limit for making the adjustments is to be disregarded.<Emphasis>Modification of acquisition cost</Emphasis>181This paragraph applies where a participant in a relevant offshore fund—aholds rights in a relevant offshore fund immediately before the effective date, andbdisposes of those rights on or after that date.2For the purposes of TCGA 1992 the participant is to be treated as if the acquisition cost for those rights were the pre-commencement acquisition cost.3“The effective date” means—aif the participant has made an election under paragraph 15, the election day, orbotherwise, the commencement day.4“Acquisition cost” means the total of the consideration, costs and expenditure described in section 38(1)(a) and (b) of TCGA 1992 (acquisition and disposal costs etc).5“Pre-commencement acquisition cost” means the total of the consideration, costs and expenditure that would have been allowable as a deduction under section 38(1)(a) and (b) of TCGA 1992 if the participant had disposed of the rights immediately before the effective date.Words in Sch. 22 para. 14(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 716(3) (with Sch. 2)Sch. 22 para. 10 having effect as specified (1.4.2010) by Finance Act 2009, Paragraph 12(2)(b) of Schedule 22 (Appointed Day) Order 2010 (S.I. 2010/670), art. 2Sch. 22 para. 8 omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Collective Investment Schemes and Offshore Funds (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2017 (S.I. 2017/1204), regs. 1(1), 13Sch. 22 para. 6 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 174, 10 Pt. 5 (with Sch. 9 paras. 1-9, 22)Sch. 22 para. 9 having effect as specified (1.4.2010) by Finance Act 2009, Paragraph 12(2)(b) of Schedule 22 (Appointed Day) Order 2010 (S.I. 2010/670), art. 2Sch. 22 para. 12(2)(b): 1.4.2010 appointed by S.I. 2010/670, art. 2Sch. 22 para. 11(1)(b)(3) having effect as specified (1.4.2010) by Finance Act 2009, Paragraph 12(2)(b) of Schedule 22 (Appointed Day) Order 2010 (S.I. 2010/670), art. 2Sch. 22 para. 11(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 716(2) (with Sch. 2)Sch. 22 para. 11(5) omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Collective Investment Schemes and Offshore Funds (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2017 (S.I. 2017/1204), regs. 1(1), 13