Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
302

(4)
An officer of Revenue and Customs may agree in a particular case to
extend the grace period allowed for an appropriate mitigation step
in circumstances specified in regulations made by the
Commissioners.
(5)
Regulations under subsection (4) may have effect in relation to
5
investments made before the day on which the regulations are made.
(6)
Nothing in subsection (4) or in regulations made under it limits the
power conferred by subsection (3).
(7)
The powers conferred on officers of Revenue and Customs by
subsections (3) and (4) include power to agree to extend a grace
10
period for a length of time that is indefinite but is capable of
becoming definite by means identified in the agreement (such as the
satisfaction of conditions).
809VK
Retention of funds to meet CGT liabilities
(1)
This section applies if—
15
(a)
there is a disposal of all or part of the holding,
(b)
the disposal counts as a potentially chargeable event or is
part of the appropriate mitigation steps taken in consequence
of a potentially chargeable event,
(c)
a chargeable gain (but not a loss) accrues to P on the disposal,
20
(d)
P is chargeable to capital gains tax (but not corporation tax)
in respect of that gain, and
(e)
the actual disposal proceeds are less than Y.
(2)
The difference between the actual disposal proceeds and Y is
referred to in this section as “the shortfall”.
25
(3)
“The actual disposal proceeds” means the disposal proceeds but
disregarding section 809Z8(4).
(4)
“Y” is the sum of—
(a)
the amount (if any) that would, but for this section, be
required to be taken offshore or re-invested in order to satisfy
30
section 809VI(1) or (2)(b), and
(b)
the amount found by applying the highest potential CGT rate
to the amount (computed in accordance with TCGA 1992) of
the chargeable gain accruing to P on the disposal.
(5)
The highest potential CGT rate is—
35
(a)
if the chargeable gain accrues to P as the trustees of a
settlement or accrues to the personal representatives of P, the
rate specified in section 4(3) of TCGA 1992, and
(b)
otherwise, the rate specified in section 4(4) of that Act
(regardless of the rate at which income tax is chargeable in
40
respect of P’s income).
(6)
If this section applies, the amount that is required to be taken
offshore or re-invested in order to satisfy section 809VI(1) or (2)(b) is
reduced by the permitted amount.
(7)
“The permitted amount” is so much of the shortfall as is used, within
45
the grace period allowed for taking the disposal proceeds offshore or

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
303

re-investing them, to make a deposit in respect of which a certificate
of tax deposit is issued to P under section 12 of the National Loans
Act 1968.
(8)
A reduction may not be made under subsection (6) unless—
(a)
when details of the deposit are confirmed to Her Majesty’s
5
Revenue and Customs, the confirmation letter states that this
section is intended to apply to the deposit, and
(b)
the amount of the deposit is no greater than the shortfall.
809VL
Effect of taking appropriate mitigation steps within grace period
(1)
This section explains the effect for the purposes of this Chapter in
10
cases where section 809VG(2) does not apply because the
appropriate mitigation steps were taken within the grace period
allowed for each step.
(2)
If disposal proceeds were taken offshore as part of those steps,
nothing in section 809VA(2) prevents anything subsequently done in
15
relation to those proceeds (or anything deriving from them) from
counting as a remittance of the underlying income or gains to the
United Kingdom at the time when the thing is subsequently done.
(3)
If disposal proceeds were re-invested as part of those steps—
(a)
the underlying income or gains continue to be treated under
20
section 809VA(2) as not remitted to the United Kingdom, and
(b)
the business investment provisions apply to the re-
investment as they apply to the original investment.
(4)
In the application of the business investment provisions to the re-
investment—
25
(a)
treat the potentially chargeable event mentioned in section
809VG(1)(b) as the relevant event,
(b)
treat the underlying income or gains as the income or gains
treated under section 809VA(2) as not remitted to the United
Kingdom as a result of the re-investment, and
30
(c)
treat the amount used to make the re-investment as the sum
originally invested.
(5)
If the re-investment is made using more than the minimum amount
of disposal proceeds required to satisfy section 809VI(1) or (2)(b)—
(a)
that investment is to be treated as two separate investments,
35
one made using the minimum amount of disposal proceeds
and one made using the excess, and
(b)
references in the business investment provisions to “the
investment” and “the holding” relate only to the investment
made using the minimum amount of disposal proceeds.
40
(6)
“The underlying income or gains” means the affected income or
gains (within the meaning of section 809VG) or, if one part of the
disposal proceeds is taken offshore and the other part re-invested, a
corresponding proportion of the affected income or gains.
(7)
A further claim must be made in accordance with section 809VA in
45
respect of the re-investment and, if no such claim is made on or
before the first anniversary of the 31 January following the tax year
in which the re-investment was made, section 809VG(2) applies, as

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
304

respects the original investment, as if the appropriate mitigation
steps had not been taken within the grace period allowed for each
step.
(8)
Section 809VM makes further provision in cases involving a tax
deposit.
5
809VM
Cases involving tax deposits
(1)
This section applies in cases where—
(a)
section 809VG(2) did not apply because the appropriate
mitigation steps were taken within the grace period allowed
for each step,
10
(b)
the amount required to be taken offshore or re-invested in
order to satisfy section 809VI(1) or (2)(b) had been reduced
under section 809VK, and
(c)
but for that reduction, the amount that was actually taken
offshore or re-invested would not have been enough to
15
satisfy section 809VI(1) or (2)(b).
(2)
The tax deposit that gave rise to the reduction is referred to in this
section as “the tax deposit”.
(3)
Use of the tax deposit to pay the relevant tax liability does not count
as remitting the underlying income or gains to the United Kingdom
20
(and, accordingly, section 809VA(2) continues to apply to the income
or gains).
(4)
If any of the CTD conditions is breached, the underlying income or
gains are to be treated as having been remitted to the United
Kingdom immediately after the day on which the breach occurs.
25
(5)
“The underlying income or gains” means such portion of the affected
income or gains (within the meaning of section 809VG) as is—
(a)
represented by the payment, in the case of subsection (3), or
(b)
affected by the breach, in the case of subsection (4).
(6)
The CTD conditions are as follows—
30
(a)
the tax deposit must not be used to pay a tax liability other
than the relevant tax liability,
(b)
if any of the tax deposit is withdrawn by the depositor, the
amount withdrawn must be taken offshore or re-invested
within the period of 45 days beginning with the day on which
35
the withdrawal was made, and
(c)
any part of the tax deposit that has been neither used to pay
a tax liability nor withdrawn by the due date must be
withdrawn by the depositor and taken offshore or re-
invested within the period of 45 days beginning with that
40
date.
(7)
Where the CTD conditions were not breached because the requisite
amount was taken offshore or re-invested within the 45-day period
mentioned in subsection (6)(b) or (c)—
(a)
section 809VL applies to the amount taken offshore or re-
45
invested as it applies to disposal proceeds, but

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
305

(b)
read the reference in section 809VL(4)(a) to the potentially
chargeable event as a reference to—
(i)
the withdrawal, in a case within subsection (6)(b), and
(ii)
the due date, in a case within subsection (6)(c).
(8)
For the purposes of this section—
5
(a)
“the relevant tax liability” means P’s liability to capital gains
tax for the tax year in which the disposal took place,
(b)
“the due date” means the date by which the relevant tax
liability is required to be paid,
(c)
“re-invested” has the meaning given in section 809VI(7), and
10
(d)
references to withdrawal include repayment for whatever
reason.
809VN
Order of disposals etc
(1)
Subsection (2) applies if at any time income or chargeable gains of an
individual are treated under section 809VA as not remitted to the
15
United Kingdom as a result of—
(a)
more than one qualifying investment made in the same target
company,
(b)
more than one qualifying investment made in companies in
the same eligible trading group, or
20
(c)
qualifying investments made in an eligible trading company
and in an eligible stakeholder company that holds
investments in that trading company.
(2)
In the application of section 809VG at that time—
(a)
treat the investments and holdings as if they were a single
25
qualifying investment and a single holding, and
(b)
assume that a disposal of all or part of that deemed single
holding affects the deemed single investment in the order in
which the qualifying investments were made (that is to say,
on a first in, first out basis).
30
(3)
Subsection (4) applies if at any time—
(a)
income or chargeable gains of an individual are treated under
section 809VA as not remitted to the United Kingdom as a
result of one or more qualifying investments,
(b)
in addition to that investment or those investments, a
35
relevant person holds at least one other investment in the
same target company, the same eligible trading group or a
related eligible company, and
(c)
that other investment is not a qualifying investment.
(4)
In the application of section 809VG at that time—
40
(a)
treat the investments and holdings as if they were a single
investment and a single holding, and
(b)
assume that a disposal of all or part of that deemed single
holding is a disposal of a holding from a qualifying
investment until the holdings from all the qualifying
45
investments have been disposed of.
(5)
The reference to a “related eligible company”—

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
306

(a)
in relation to an eligible trading company, is to an eligible
stakeholder company that holds investments in that
company, and
(b)
in relation to an eligible stakeholder company, is to an
eligible trading company in which that company holds
5
investments.
(6)
Subsections (2) and (4) apply whether the investments in question
are held by the same relevant person or different ones.
809VO
Investments made from mixed funds
(1)
This section applies if—
10
(a)
but for section 809VA(2), income or gains would have been
remitted to the United Kingdom by virtue of a relevant event,
and
(b)
section 809Q (transfers from mixed funds) would have
applied in determining the amount that would have been so
15
remitted.
(2)
The relevant event counts as an offshore transfer for the purposes of
section 809R(4).
(3)
The holding is to be treated as containing a proportion of each kind
of income and capital contained in the invested property equal to the
20
fixed proportion.
(4)
“The fixed proportion” is the proportion of that kind of income or
capital contained in the invested property by virtue of subsection (2).
(5)
“The invested property” means the money or other property used to
make the investment.
25
(6)
Subsection (7) applies in cases where—
(a)
section 809VG(2) does not apply because an amount is taken
offshore, re-invested or used to make a tax deposit, or
(b)
section 809VM(4) does not apply because an amount is taken
offshore or re-invested.
30
(7)
The amount taken offshore, re-invested or used to make a tax deposit
is treated, immediately after that step, as containing the fixed
proportion of each kind of income and capital contained in the
holding.
(8)
In cases where section 809VG(2) applies—
35
(a)
the affected income or gains are so much of the fixed amount
of each kind of income or gain mentioned in subsection (1)(a)
as reflects the portion of the investment affected by the
potentially chargeable event (see section 809VG(6)),
(b)
“the fixed amount” is the amount of that kind of income or
40
gain that the holding is treated as containing by virtue of
subsection (3), and
(c)
section 809Q does not apply in determining the affected
income or gains.
(9)
Section 809R(2) and (3) and section 809S apply for the purposes of
45
this section.”

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
307

8
After the sections inserted by paragraph 7 insert the heading “Relief for
certain UK services”.
9
Immediately before section 809X insert the heading “Exempt property relief”.
Formerly exempt property used to make investment
10
In section 809Y (property that ceases to be exempt property treated as
5
remitted), after subsection (5) insert—
“(6)
Subsection (1) does not apply to property that ceases to be exempt
property if—
(a)
the property, or anything into which it is converted, is used
by a relevant person to make a qualifying investment within
10
the period of 45 days beginning with the day on which it
ceased to be exempt property, and
(b)
the remittance basis user makes a claim for relief under this
subsection on or before the first anniversary of the 31 January
following the tax year in which the property ceases to be
15
exempt property.
(7)
The reference in subsection (6)(a) to anything into which property is
converted is—
(a)
if the property is disposed of, the disposal proceeds, and
(b)
if the property is converted into money in some other way,
20
the money into which it is converted,

(including where the disposal or conversion occurs after the
property ceases to be exempt property).
(8)
If subsection (1) does not apply by virtue of subsection (6)—
(a)
the property (or thing into which it was converted) used to
25
make the investment is to be treated as containing or deriving
from an amount of each kind of income and gain mentioned
in section 809Q(4)(a) to (h) equal to the fixed amount,
(b)
the income or gains treated under section 809X as not
remitted to the United Kingdom continue to be treated as not
30
remitted to the United Kingdom even though the property
has ceased to be exempt property, and
(c)
the business investment provisions apply to the income and
gains as they apply to income or gains treated under section
809VA(2) as not remitted to the United Kingdom.
35
(9)
“The fixed amount” is the amount of that kind of income or gain
contained in the property when it was brought to, or received or
used in, the United Kingdom (as mentioned in section 809X).
(10)
If the investment is made using more than just the property (or thing
into which it was converted), treat only the part made using the
40
property (or thing into which it was converted) as “the investment”
for the purposes of the business investment provisions.”
11
In section 809Z2 (personal use rule), in subsection (2), omit paragraph (a)
(including the word “and” at the end of it).
12
In section 809Z4 (temporary importation rule), in subsection (3)—
45
(a)
omit “or” at the end of paragraph (b),

Finance (No. 4) Bill
Schedule 12 — Foreign income and gains
Part 2 — Remittance for investment purposes
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(b)
insert “or” at the end of paragraph (c), and
(c)
after that paragraph insert—
“(d)
all or any part of the income or chargeable gains
contained in the property (or from which the property
derives) is treated, or continues to be treated, under
5
section 809VA(2), 809Y(8)(b) or 809YC(2) as not
remitted to the United Kingdom.”
Interpretation provisions
13
In section 809M (meaning of “relevant person”), in subsection (1), for
“sections 809L, 809N and 809O” substitute “this Chapter”.
10
14
In section 809Z7 (interpretation of Chapter), omit subsection (7).
15
For the heading of that section substitute “Meaning of “foreign income and
gains” etc”.
16
After that section insert—
“809Z8
Meaning of “the disposal proceeds”
15
(1)
In this Chapter, in relation to a sale or other disposal, “the disposal
proceeds” means—
(a)
the consideration for the disposal, less
(b)
any agency fees that are deducted before the consideration is
paid or otherwise made available to or for the benefit of the
20
person making the disposal (“the transferor”) or any other
relevant person.
(2)
The following rules apply in determining the consideration for the
disposal.
(3)
If the consideration is provided in the form of anything other than
25
money, the amount of the consideration is the market value of the
thing at the time of the disposal.
(4)
If the disposal is made other than by way of a bargain made at arm’s
length, the disposal is deemed to be made for a consideration equal
to the market value, immediately before the disposal, of the thing
30
being disposed of.
(5)
Without limiting the generality of subsection (4), a disposal made to
another relevant person or to a person connected with a relevant
person is treated in all cases as made other than by way of a bargain
at arm’s length.
35
(6)
In subsection (1), “agency fees” means fees and other incidental costs
of the disposal that are charged to the transferor by any person by or
through whom the disposal is effected, but excluding any such fees
or costs that—
(a)
are charged to the transferor by another relevant person, or
40
(b)
are to be passed on to or otherwise applied for the benefit of
a relevant person.
(7)
The exclusion mentioned in subsection (6) does not apply to the
extent that the fees or costs—