The rules originally introduced in 1984 apply to ‘non-qualifying’ offshore funds. A ‘non-qualifying’ fund is one which has not been certified by the Board, for the account period in question, as a ‘distributing fund’ (ICTA 1988, s. 760(1)).

Since the rules are aimed at offshore funds which roll up their income, an exemption is provided for funds which distribute most of their income as it arises. Where an interest in a distributing fund is disposed of, the gain will not attract an income tax charge but will instead be chargeable according to capital gains tax principles.

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