(1) This section applies where—

(a) a dividend is paid by an offshore fund, and

(b) the offshore fund fails to meet the qualifying investments test at any time in the relevant period.

(2) The dividend is treated as interest for income tax purposes.

(3) For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund’s qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).

(4) “The relevant period” means—

(a) the relevant period of account of the offshore fund, or

(b) if longer, the period of 12 months ending on the last day of that period.

(5) “The relevant period of account” means—

(a) the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and

(b) the period of account in which the dividend is paid, in any other case.

(6) This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.

(7) In this section—

“dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;

“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);

“offshore fund” has the same meaning as in [section 40A of FA 2008]¹;

“qualifying investments” has the meaning given in section 494 of CTA 2009.