An investor who redeems his interest in an equalisation fund is charged to tax on an amount equal to the ‘equalisation element relevant to the asset disposed of’ (ICTA 1988, Sch. 28, para. 6). This is defined as the amount which would be credited to the fund’s equalisation account if on the date of the disposal the interest were acquired by another investor directly from the fund managers. In other words, tax is charged prima facie on the same amount as is treated by para. 2 as distributed by the fund.
However, the investor will be charged instead on the offshore income gain computed under the normal rules for non-qualifying funds, if this is lower (see below).