In the absence of specific provision, it would be possible to avoid the charge under the offshore fund legislation simply by rolling up the gain at one further remove from the investor. For example, Fund A, which receives investors’ money, could re-invest it in Fund B. Provided Fund B rolled up the income accruing, Fund A would have no income to distribute and would pass the distributor test. Thus when the investors sold their shares in Fund A the gain would not be chargeable to income tax.

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