Previously, the Inland Revenue made a clear distinction between funds which distribute net income annually and predominantly offshore 'roll-up', or 'accumulator' funds, which do not, and are therefore taxed in the UK on a far more punitive scale. When investors sell their holdings in roll-up funds, all of their gains are taxed as income, which means that they cannot use their capital gains tax allowances to offset their liability.

However, following pressure from the financial services industry, the government this week introduced a new regime which will simplify the rules and ensure that 'investors in offshore funds and equivalent UK peoducts are subject to similar tax treatment.'

Speaking to the Financial Times, Deloitte and Touche partner, Simon Philip explained that: 'The rules were created when income and capital gains taxes were very different. Recognising the need for a total overhaul is very welcome.'

He reiterated: 'Income should be taxed to income tax and capital gains to CGT.'