Income Tax Act 2007 section 809VO

Investments made from mixed funds

Section 809VO sets out how the composition of a qualifying business investment is determined when it is made from a mixed fund, and how that composition is preserved when the investment is disposed of, taken offshore, reinvested, or used to make a tax deposit.

• When a qualifying investment under business investment relief is made from a mixed fund (an overseas fund containing more than one type of income, gains or capital), the investment is treated as containing a fixed proportion of each kind of income and capital that was in the fund immediately before the transfer, using the offshore transfer ordering rules.
• That fixed proportion is locked in for the life of the investment, so the holding always carries the same proportional mix of income, gains and capital as the original mixed fund — unless part of the holding is designated as TRF (Temporary Repatriation Facility) capital, in which case the TRF capital element is stripped out and a recalculated fixed proportion is used instead.
• If the investment proceeds are taken offshore, reinvested in another qualifying investment, or used to make a tax deposit (so that no remittance charge arises), the amount moved retains the same fixed proportion of each kind of income and capital that was in the holding, preserving the original mix for any future remittance basis analysis.
• If a potentially chargeable event occurs and the appropriate mitigation steps are not taken within the grace period, the income and gains treated as remitted are calculated by applying the fixed proportion to the portion of the investment affected — the normal mixed fund ordering rules in section 809Q do not apply to that calculation.