Introduction Background Note
8.The purpose of the section is to prevent a tax advantage being gained by holding interest bearing assets within an offshore fund structure.
9.Distributions made as dividends from offshore funds and received by individual shareholders were taxed at rates of 10 per cent for basic rate and 32.5 per cent for higher rate taxpayers.
10.From 22 April 2009, where a distribution from an offshore fund takes the form of a dividend the rate will be the dividend tax rate after taking into account the dividend tax credit. However, where the offshore fund is substantially invested in interest bearing, or economically similar, assets as described in paragraph 4 above then any distribution will be treated as interest for income tax purposes.