Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 34 — Stamp duty land tax: higher rate for certain transactions
622

      (2)
After subsection (1) insert—
“(1A)
The rate of tax is determined as follows.

Step 1

Determine the fraction of the relevant consideration produced by
dividing the total amount of that consideration by the number of
5
qualifying flats contained in the premises.

Step 2

If the amount produced by step 1 is £2,000,000 or less, determine the
rate of tax and the tax chargeable in accordance with subsections (2)
and (3).
10

Step 3

If the amount produced by step 1 is more than £2,000,000 and the
condition in paragraph 3(3) of Schedule 4A is not met with respect to
the transaction, determine the rate of tax and the tax chargeable in
accordance with subsections (2) and (3).
15

Step 4

If the amount produced by step 1 is more than £2,000,000 and the
condition in paragraph 3(3) of Schedule 4A is met with respect to the
transaction, subsections (2) and (3) do not apply, and the amount of
tax chargeable in respect of the transaction is 15% of the chargeable
20
consideration for the transaction.”
      (3)
For subsection (2) substitute—
“(2)
The rate of tax is determined under section 55 by reference to the
fraction of the relevant consideration calculated under step 1 of
subsection (1A).”
25
Minor and consequential amendments
6     (1)
Section 109 (general power to vary Part 4 of FA 2003 by regulations) is
amended as follows.
      (2)
After subsection (2) insert—
“(2A)
The power under subsection (2)(b) includes power to alter the
30
conditions for the application to a chargeable transaction of
paragraph 3 of Schedule 4A (higher rate for certain transactions),
other than the condition that the transaction must be a high-value
residential transaction.”
      (3)
In subsection (3)—
35
(a)
for “subsection (2)(b),” substitute “subsections (2)(b) and (2A),”,
(b)
omit the “or” at the end of paragraph (a), and
(c)
after that paragraph insert—
“(aa)
section 74(1A) (exercise of collective rights by tenants
of flats),
40
(ab)
Schedule 4A (amount of tax chargeable: high-value
interests in dwellings), or”.
7     (1)
Schedule 5 (amount of tax chargeable: rent) is amended as follows.
      (2)
In paragraph 9—

Finance (No. 4) Bill
Schedule 34 — Stamp duty land tax: higher rate for certain transactions
623

(a)
in sub-paragraph (4)—
(i)
after “section 55” insert “or 74(1A)”, and
(ii)
after “Schedule” (in the second place it occurs) insert “4A or”,
and
(b)
in sub-paragraph (5)—
5
(i)
for “that section” substitute “section 55”, and
(ii)
after “Schedule” (in the second place it occurs) insert “6B”.
      (3)
In paragraph 9A(1), for “where there is chargeable consideration other than
rent.” substitute “where—
(a)
there is chargeable consideration other than rent, and
10
(b)
section 55 (amount of tax chargeable: general) applies to
the transaction (whether as a result of paragraph 2 of
Schedule 4A or otherwise).”
8
In paragraph 2(4) of Schedule 6B (transfers involving multiple dwellings)—
(a)
omit the “or” at the end of paragraph (a), and
15
(b)
after that paragraph insert—
“(aa)
paragraph 3 of Schedule 4A applies to it, or”.
9     (1)
Schedule 15 (partnerships) is amended as follows.
      (2)
In paragraphs 11(2C) and 19(2C), in the substituted sub-paragraph (4)—
(a)
after “section 55” insert “or 74(1A)”, and
20
(b)
after “Schedule” (in the second place it occurs) insert “4A or”.
      (3)
In paragraph 30(2)—
(a)
for “either or both” substitute “one or more”, and
(b)
after paragraph (a) insert—
“(aa)
paragraph 3 of Schedule 4A applies to the
25
transaction;”.
Application of amendments
10    (1)
Except as mentioned in sub-paragraph (2), the amendments made by this
Schedule have effect in relation to any land transaction of which the effective
date is on or after 21 March 2012.
30
      (2)
Those amendments do not have effect in relation to any transaction that is—
(a)
effected in pursuance of a contract entered into and substantially
performed before 21 March 2012,
(b)
effected in pursuance of a contract entered into before that date and
not excluded by sub-paragraph (3), or
35
(c)
excepted by sub-paragraph (4).
      (3)
A transaction effected in pursuance of a contract entered into before 21
March 2012 is excluded by this sub-paragraph if—
(a)
there is any variation of the contract, or assignment (or assignation)
of rights under the contract, on or after 21 March 2012,
40
(b)
the transaction is effected in consequence of the exercise on or after
that date of any option, right of pre-emption or similar right, or
(c)
on or after that date there is an assignment (or assignation), subsale
or other transaction relating to the whole or part of the subject-matter

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 2 — The past
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of the contract as a result of which a person other than the purchaser
under the contract becomes entitled to call for a conveyance.
      (4)
A transaction treated as occurring under paragraph 17(2) or 17A(4) of
Schedule 15 to FA 2003 (partnerships) is excepted by this sub-paragraph if
the effective date of the land transfer referred to in sub-paragraph (1)(a) of
5
the paragraph concerned is before 21 March 2012.
Schedule 35
Section 216

Agreement between UK and Switzerland
Part 1
Introduction
10
The Agreement and the Joint Declaration
1
In this Schedule—
(a)
“the Agreement” means the agreement signed on 6 October 2011
between the United Kingdom and the Swiss Confederation on co-
operation in the area of taxation, as amended by a protocol signed by
15
them on 20 March 2012,
(b)
“the Joint Declaration” means the joint declaration (concerning a tax
finality payment) forming an integral part of that protocol,
(c)
“the start date” is the date on which the Agreement enters into force
in accordance with its terms (see Article 44), and
20
(d)
references to a numbered Article are to the Article of that number in
the Agreement.
Part 2
The past
Taxes affected
25
2     (1)
The taxes affected by this Part are—
(a)
income tax,
(b)
capital gains tax,
(c)
inheritance tax, and
(d)
VAT.
30
      (2)
Accordingly, this Part affects—
(a)
amounts of income on which income tax is charged,
(b)
chargeable gains,
(c)
the value of property forming part of the value transferred by a
chargeable transfer, and
35
(d)
the value of supplies on which VAT is charged.
      (3)
An amount falling within one (or more) of those descriptions is referred to
as a “taxable amount” and, in relation to such an amount, “tax” means

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 2 — The past
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whichever of the taxes mentioned in sub-paragraph (1) is (or are) charged on
it.
Application of this Part
3     (1)
This Part applies if—
(a)
a one-off payment is levied in accordance with Part 2 of the
5
Agreement,
(b)
a certificate is issued under Article 9(4) to a person (“P”) in respect of
that payment, and
(c)
the certificate is approved by P or considered approved by virtue of
that Article.
10
      (2)
The certificate is referred to in this Part as “the Part 2 certificate”.
Qualifying amounts
4     (1)
The Part 2 certificate applies to taxable amounts in respect of which the
conditions in sub-paragraph (2) are met.
      (2)
The conditions are—
15
(a)
P is liable to tax on the amount,
(b)
the amount is untaxed,
(c)
the taxable event took place before the start date, and
(d)
the necessary link with the certificate can be demonstrated.
      (3)
The necessary link is—
20
(a)
in a case falling within Article 9(3) (non-UK domiciled individuals
opting for self-assessment method), that the amount is included in
the omitted taxable base by reference to which the one-off payment
was calculated, and
(b)
in any other case, that the amount forms part of or is represented by
25
the assets comprised in the relevant capital by reference to which the
one-off payment was calculated (referred to in the Agreement as Cr).
      (4)
For the purposes of sub-paragraph (3)(b), amounts are assumed to be
attributed to assets in the way that produces the most beneficial outcome for
P.
30
      (5)
Paragraph 11 makes further provision about the interpretation of sub-
paragraph (2).
      (6)
Amounts to which the Part 2 certificate applies in accordance with this
paragraph are referred to in this Part as “qualifying amounts”.
Eligibility for clearance
35
5     (1)
The effect of the Part 2 certificate depends on whether P is eligible for
clearance.
      (2)
P is “eligible for clearance” if—
(a)
none of the circumstances listed in Article 9(13)(a) to (e) apply (tax
investigations etc), and
40
(b)
Article 12(1) does not apply (wrongful behaviour in relation to non-
UK domiciled status).

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 2 — The past
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      (3)
Otherwise, P is “not eligible for clearance”.
Effect if P eligible for clearance
6     (1)
This paragraph sets out the effect of the Part 2 certificate if P is eligible for
clearance.
      (2)
P ceases to be liable to tax on qualifying amounts.
5
      (3)
Sub-paragraph (2) does not apply to a qualifying amount if—
(a)
the amount was held in the United Kingdom,
(b)
at some point during the period beginning with 6 October 2011 and
ending immediately before the start date, it ceased to be held in the
United Kingdom, and
10
(c)
after that point (but before the start date) it began to be held in
Switzerland.
      (4)
Instead, such part of the one-off payment as is attributable (on a just and
reasonable basis) to the qualifying amount is to be treated as if it were a
credit allowable against the tax due from P taking account of that amount.
15
      (5)
The meaning of tax due “taking account of” an amount is explained in Part
5 of this Schedule.
      (6)
The form in which a qualifying amount was held in the United Kingdom is
irrelevant (so references in sub-paragraph (3) to the amount include an asset
representing the amount).
20
      (7)
The total qualifying amounts to which sub-paragraphs (2) and (4) can apply
as a result of the Part 2 certificate is limited to X.
      (8)
If the total exceeds X, the particular qualifying amounts to which those sub-
paragraphs apply are assumed to be those that would produce the most
beneficial outcome for P.
25
      (9)
X is—
(a)
in a case falling within Article 9(3), the value of the omitted taxable
base by reference to which the one-off payment was calculated, and
(b)
in any other case, the value shown in the Part 2 certificate as the value
of the relevant capital (Cr).
30
Ceasing to be liable to tax
7     (1)
The result of “ceasing to be liable” to tax on a qualifying amount depends on
the tax (or taxes) in respect of which the amount is untaxed.
      (2)
For income tax or capital gains tax, the result is that the amount is no longer
liable to be brought into account in assessing the income tax or capital gains
35
tax due from P for the tax year in which the amount would otherwise be
liable to be brought into account.
      (3)
For inheritance tax, the result is that any inheritance tax due from P in
respect of the chargeable transfer and attributable to the property whose
value is included in the amount is no longer due from P.
40
      (4)
For VAT, the result is that P is no longer required to account for output tax
on the amount in determining the VAT payable by P for the prescribed

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 2 — The past
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accounting period in which P would otherwise be required to account for
output tax on the amount.
      (5)
But—
(a)
ceasing to be liable to tax on a qualifying amount does not affect P’s
liability to tax on any other amount, and
5
(b)
P’s liability to tax on any other amount remains what it would have
been, had the qualifying amount been brought into account in
calculating that liability.
      (6)
Accordingly, if the qualifying amount were ever to be brought into account
and it were found that the tax assessed on any other amount should have
10
been higher as a result, P would remain liable for the extra tax due on that
other amount and for any associated ancillary charge.
      (7)
For the purposes of sub-paragraphs (5) and (6), the qualifying amount is
assumed to form the top slice of the total sum on which P is liable to tax.
Effect if P not eligible for clearance
15
8     (1)
This paragraph sets out the effect of the Part 2 certificate if P is not eligible
for clearance.
      (2)
The one-off payment is to be treated as if it were a credit allowable against
the tax due from P taking account of qualifying amounts.
      (3)
The one-off payment is to be applied for the purposes of sub-paragraph
20
(2)—
(a)
in the order specified in sub-paragraph (4), and
(b)
subject to that, in the way that produces the most beneficial outcome
for P.
      (4)
The order is—
25
(a)
first, for VAT,
(b)
then, for income tax,
(c)
then, for capital gains tax, and
(d)
finally, for inheritance tax.
Interest, penalties etc
30
9     (1)
Where, by virtue of this Part, P ceases to be liable to tax on a qualifying
amount, P also ceases to be liable to any ancillary charge directly connected
with that amount.
      (2)
Where, by virtue of this Part, all or part of a one-off payment is treated as if
it were a credit allowable against the tax due from P taking account of a
35
qualifying amount, the credit may also be used to offset any ancillary charge
directly connected with that amount.
      (3)
Sub-paragraph (4) applies in the case of a qualifying amount that is part only
of—
(a)
an amount of income on which income tax is charged,
40
(b)
a chargeable gain,
(c)
the value of property forming part of the value transferred by a
chargeable transfer, or
(d)
the value of a supply on which VAT is charged.

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 2 — The past
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      (4)
The amount of any ancillary charge directly connected with that qualifying
amount is determined by apportioning the ancillary charge directly
connected with the income, gain or value on a just and reasonable basis.
Repayments
10
Nothing in this Part entitles any person to a repayment or refund of tax, save
5
for any repayment or refund to which P may be entitled by virtue of
paragraph 6(4) or 8(2) if the credit allowable under that paragraph exceeds
the total amount of tax against which the credit is allowable.
Paragraph 4: supplementary provision
11    (1)
This paragraph explains how paragraph 4(2) is to be read for each
10
description of taxable amount.
      (2)
For income and chargeable gains—
(a)
the reference to P being “liable to tax” includes a case where P would
be so liable if the income or gain were to be remitted to the United
Kingdom,
15
(b)
“the taxable event” takes place when the income arises or the gain
accrues (whether or not, in a remittance basis case, it is remitted to
the United Kingdom), and
(c)
the income or gain is “untaxed” if it has not been brought into
account in an assessment to income tax or, as the case may be, capital
20
gains tax for the tax year in which it is required to be brought into
account.
      (3)
For the value of property forming part of the value transferred by a
chargeable transfer—
(a)
“the taxable event” takes place when the chargeable transfer is made
25
(or, in the case of a potentially exempt transfer, when death occurs),
and
(b)
the value of the property is “untaxed” if it has not been brought into
account in determining the value transferred by the chargeable
transfer.
30
      (4)
For the value of supplies on which VAT is charged—
(a)
“the taxable event” takes place when P makes the supply, and
(b)
the value of the supply is “untaxed” if output tax on the supply has
not been accounted for in determining the VAT payable by P for the
prescribed accounting period in which P is required to account for
35
output tax on the supply.
      (5)
Paragraph 4(2)(a) is not satisfied in a case where P is liable to tax only
because the liability has been transferred to P as a result of action taken by
HMRC (for example, as a result of a notice given under section 77A of VATA
1994 or a direction given under regulation 81 of the Income Tax (PAYE)
40
Regulations 2003 (S.I. 2003/2682)).
Refund of one-off payment
12
If a one-off payment is refunded by HMRC in accordance with Article 15(3),
this Part ceases to apply with respect to that payment.