The Unit Trust Schemes and Offshore Funds (Non-qualifying Investments Test) Order 2006

Amendments to paragraph 8 of Schedule 10 to the Finance Act 1996

5.  After sub-paragraph (7F)(1) insert the following sub-paragraphs—

“(7G) For the purposes of this paragraph, in relation to a unit trust scheme, offshore fund or open-ended investment company, there is a hedging relationship between a derivative contract on the one hand (“the hedging instrument”) and an asset on the other (“the hedged item”) if and to the extent that—

(a) the hedging instrument and the hedged item are designated by the scheme, fund or company as a hedge, or

(b) in any other case the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of a hedged item which is a recognised asset or an identified portion of such an asset that is attributable to a particular risk and could affect the total net return of the scheme, fund or company.

(7H) For the purposes of sub-paragraph (7G)(b) above, the “total net return” of a scheme, fund or company means the total net return of the scheme, fund or company, computed—

(a) in accordance with generally accepted accounting practice, or

(b) in the case of accounts prepared in a jurisdiction outside the United Kingdom, in accordance with generally accepted accounting practice in that jurisdiction.

(7I) In this paragraph “alternative finance arrangements” has the meaning given by section 46(1) of the Finance Act 2005(2).”.

(1)

Sub-paragraph (7F) of paragraph 8 of Schedule 10 was inserted by paragraph 12(3) of Schedule 26 to the Finance Act 2004.

(2)

2005 c. 7.