Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 3 — The future: income tax and capital gains tax
629

Part 3
The future: income tax and capital gains tax
Taxes affected
13
The taxes affected by this Part are—
(a)
income tax, and
5
(b)
capital gains tax.
Application of this Part
14    (1)
This Part applies if—
(a)
a sum is levied under Article 19 on an amount of income or a gain of
a person, and
10
(b)
a certificate is issued to the person under Article 30(1) in respect of
the levying of that sum (or sums that include that sum).
      (2)
This Part also applies if—
(a)
a retention is made under EUSA from an amount of income or a gain
of a person,
15
(b)
a tax finality payment, as contemplated by the Joint Declaration, is
made on the same income or gain, and
(c)
a certificate is issued to the person under the Joint Declaration in
respect of the making of that payment (or payments that include that
payment).
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      (3)
In this Part—
(a)
the person is referred to as “P”,
(b)
the certificate is referred to as “the relevant certificate”,
(c)
the amount of income, or the gain, is referred to as “the cleared
amount”,
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(d)
the account or deposit (within the meaning of the Agreement) to
which the certificate relates (or to which certificates relate that
include the certificate) is referred to as “the underlying account”, and
(e)
the sum levied under Article 19 on the cleared amount or, as the case
may be, the tax finality payment made on it is referred to as “the
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transferred sum”.
Effect of relevant certificate
15    (1)
The effect of the relevant certificate depends on whether P makes an election
under paragraph 16 in respect of the underlying account for the applicable
year.
35
      (2)
“The applicable year” is the tax year for which P is liable to income tax or, as
the case may be, capital gains tax on the cleared amount.
      (3)
If P makes an election, the transferred sum is to be treated as if it were a
credit allowable against the income tax or, as the case may be, capital gains
tax due from P for the applicable year.
40
      (4)
If P does not make an election, P ceases to be liable to income tax or, as the
case may be, capital gains tax on the cleared amount.

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 3 — The future: income tax and capital gains tax
630

      (5)
Sub-paragraph (4) is to be read in accordance with paragraph 7.
      (6)
Where P ceases to be liable to tax on the cleared amount, P also ceases to be
liable to any ancillary charge directly connected with that amount.
Election
16    (1)
P may make an election under this paragraph in respect of the underlying
5
account for a tax year if all the affected amounts are included in full in a
return (or amended return) made by P under Part 2 of TMA 1970 for that tax
year.
      (2)
In relation to a tax year, an amount is an “affected amount” if—
(a)
a certificate is issued to P under Article 30(1) or the Joint Declaration
10
in respect of the levying of a sum, or the making of a tax finality
payment, on that amount,
(b)
the account or deposit to which the certificate relates is the
underlying account, and
(c)
the amount is required to be brought into account in assessing the
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income tax or capital gains tax due from P for that tax year.
      (3)
An election under this paragraph must be made in the return or amended
return in which the affected amounts are included.
      (4)
An election may only be made under this paragraph if it is accompanied by
all the relevant certificates relating to the underlying account.
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      (5)
For the purposes of paragraph 15, P is treated as making an election under
this paragraph in respect of the underlying account for a tax year if a claim
is made under Part 3 of TIOPA 2010 (double taxation relief for special
withholding tax) in relation to any of the affected amounts.
      (6)
Section 143 of TIOPA 2010 (taking account of special withholding tax in
25
calculating income or gains) applies with any necessary modifications in
relation to a tax finality payment as it applies in relation to special
withholding tax.
Other credits to be allowed first
17
Other than a credit allowed under Part 3 of TIOPA 2010, any credit for
30
foreign tax allowed under that Act against the income tax or, as the case may
be, capital gains tax due from P for the applicable year is to be allowed before
effect is given to paragraph 15(3).
Repayments
18    (1)
Sub-paragraph (2) applies if the amount of a credit allowable under
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paragraph 15(3) exceeds the amount of income tax or, as the case may be,
capital gains tax due from P for the applicable year (before set-off).
      (2)
The excess is to be set against any amount of the other tax (income tax or
capital gains tax) due from P for that year.
      (3)
Nothing in this Part entitles any person to a repayment or refund of tax, save
40
for any repayment to which P may be entitled as a result of paragraph 15(3)
if, in relation to a credit allowable under that paragraph, there is any
remaining balance after applying—

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 4 — The future: inheritance tax
631

(a)
sub-paragraph (2), and
(b)
section 138(4)(a) or 140(5)(a) of TIOPA 2010, if applicable to the
cleared amount.
Relationship with special withholding tax rules
19
The Joint Declaration does not count for the purposes of section 136(6)(b) of
5
TIOPA 2010 (definition of “special withholding tax”) as a corresponding
provision of international arrangements.
Part 4
The future: inheritance tax
Taxes affected
10
20
This Part affects inheritance tax.
Application of this Part
21    (1)
This Part applies if—
(a)
an amount is withheld under Article 32(2) in respect of relevant
assets of a deceased person (“P”), and
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(b)
a certificate is issued under Article 32(6) in respect of the withholding
of that amount.
      (2)
The certificate is referred to in this Part as “the Article 32 certificate”.
      (3)
The relevant assets in relation to which the Article 32 certificate is issued are
referred to as “the cleared assets”.
20
      (4)
Any reference in this Part to “the chargeable transfer” is to the transfer made
(under section 4 of IHTA 1984) on P’s death.
Effect of Article 32 certificate
22    (1)
The cleared assets are to be treated as if they were excluded property in
determining the value of P’s estate immediately before P’s death.
25
      (2)
As a result, any ancillary charge directly connected with those assets is also
extinguished.
      (3)
But—
(a)
treating the cleared assets as if they were excluded property does not
affect any liability to inheritance tax on the rest of P’s estate, and
30
(b)
that liability remains what it would have been, had the cleared assets
not been treated as excluded property.
      (4)
Accordingly, if the cleared assets were ever to be included in an account or
further account under section 216 or 217 of IHTA 1984 in respect of the
chargeable transfer and it were found that the inheritance tax charged on the
35
value of the property in P’s estate other than the cleared assets should have
been higher, the extra tax charged on the value of that other property
remains due, together with any associated ancillary charge.

Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 5 — General provisions
632

      (5)
For the purposes of sub-paragraphs (3) and (4), the value of the cleared
assets is assumed to form the highest part of the value transferred by the
chargeable transfer.
Election in respect of Article 32 certificates
23    (1)
This paragraph applies if the cleared assets for each of the Article 32
5
certificates issued in respect of P’s death are included in full in an account or
further account delivered in respect of P’s death under section 216 or 217 of
IHTA 1984 within the time permitted for delivering such an account or
further account.
      (2)
The person who delivers the account or further account may elect to
10
disapply paragraph 22.
      (3)
An election under this paragraph must be made in writing at the same time
as the account or further account in which all the cleared assets are included,
and signed by each person delivering the account or further account.
      (4)
An election may only be made under this paragraph if it is accompanied by
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each of the Article 32 certificates.
      (5)
If an election is made under this paragraph—
(a)
paragraph 22 does not apply to the cleared assets for any of the
Article 32 certificates issued in respect of P’s death, and
(b)
the amounts withheld under Article 32(2) are instead to be treated as
20
if they were credits allowable against the inheritance tax due on the
value transferred by the chargeable transfer (calculated with the
value of all those cleared assets brought into account).
Repayments
24
Nothing in this Part entitles any person to a repayment or refund of tax, save
25
for any repayment to which a person may be entitled as a result of paragraph
23 if the credit allowable under that paragraph exceeds the inheritance tax
due from the person on the value transferred by the chargeable transfer.
Part 5
General provisions
30
Information exchange
25
No obligation of secrecy (whether imposed by statute or otherwise) prevents
HMRC from disclosing information pursuant to a request made by virtue of
Article 36 (reciprocity measures of the United Kingdom).
Amounts recoverable as if they were VAT
35
26    (1)
Part 2 of this Schedule applies to amounts otherwise recoverable under
paragraph 5(3) of Schedule 11 to VATA 1994 as a debt due to the Crown
(amounts shown on invoices as VAT etc) in the same way as it applies to
VAT.
      (2)
But in the application of Part 2 to such amounts—
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Finance (No. 4) Bill
Schedule 35 — Agreement between UK and Switzerland
Part 5 — General provisions
633

(a)
a reference to the value of a supply on which VAT is charged is a
reference to the value of the supply shown in the invoice mentioned
in paragraph 5(2) of that Schedule,
(b)
“the taxable event” takes place when the invoice is issued,
(c)
the value of the supply shown in the invoice is “untaxed” if the
5
amount otherwise recoverable under paragraph 5(3) of that Schedule
has not been recovered, and
(d)
“ceasing to be liable” to tax on the value of that supply means that the
amount otherwise recoverable is no longer recoverable.
General interpretation
10
27    (1)
In this Schedule—
“ancillary charge” means any interest, penalty, surcharge or other
ancillary charge;
“assessment”, in relation to a tax, includes a determination and also
includes an amended assessment or determination (and “assess” is to
15
be read accordingly);
“chargeable gain” means a gain that is a chargeable gain for the
purposes of TCGA 1992;
“chargeable transfer” has the meaning given in section 2 of IHTA 1984;
“EUSA” means the agreement dated 26 October 2004 between the
20
European Community and the Swiss Confederation providing for
measures equivalent to those laid down in Council Directive 2003/
48/EC on taxation on savings income in the form of interest
payments;
“HMRC” means Her Majesty’s Revenue and Customs;
25
“qualifying amount” is defined in paragraph 4;
“remitted to the United Kingdom” means remitted to the United
Kingdom within the meaning of Chapter A1 of Part 14 of ITA 2007;
“the value transferred”, in relation to a chargeable transfer, has the
meaning given in section 3 of IHTA 1984;
30
“taxable amount” is defined in paragraph 2;
“VAT” means value added tax charged in accordance with VATA 1994.
      (2)
An expression used in relation to a tax has the same meaning as in
enactments relating to that tax.
      (3)
A reference to a person being “liable” includes being liable jointly with
35
others.
      (4)
A reference to the most beneficial outcome for P is a reference to the most
beneficial outcome for P with respect to P’s liability to tax.
      (5)
A reference to the tax due “taking account of” a qualifying amount is—
(a)
if the amount is an amount of income or a chargeable gain, a
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reference to the income tax or capital gains tax due for the tax year in
which the amount is required to be brought into account (calculated
with that amount brought into account),
(b)
if the amount is the value of property forming part of the value
transferred by a chargeable transfer, a reference to the inheritance tax
45
due on the value transferred by the chargeable transfer (calculated
with that amount brought into account),

Finance (No. 4) Bill
Schedule 36 — International military headquarters, EU forces, etc
634

(c)
if the amount is the value of a supply on which VAT is charged, a
reference to the VAT payable for the prescribed accounting period in
which output tax on the supply is required to be brought into
account (calculated with that output tax brought into account), and
(d)
if the amount is the value of a supply to which Part 2 applies by
5
virtue of paragraph 26, a reference to the amount otherwise
recoverable under paragraph 5(3) of Schedule 11 to VATA 1994 in
respect of that supply.
Schedule 36
Section 218

International military headquarters, EU forces, etc
10
FA 1960
1     (1)
Section 74A of FA 1960 (visiting forces and allied headquarters: stamp duty
land tax exemptions) is amended as follows.
      (2)
In subsection (4)—
(a)
for “allied”, in the first place, substitute “international military”, and
15
(b)
omit paragraph (c).
      (3)
In subsection (5)—
(a)
omit paragraph (a),
(b)
in paragraph (b), after “Council” insert “made for giving effect to an
international agreement”, and
20
(c)
in paragraph (c), after “detachment of” insert “a”.
      (4)
Accordingly, in the heading for that section for “allied” substitute
“international military”.
IHTA 1984
2
In section 6 of IHTA 1984 (excluded property), in subsection (4), after
25
“section 155(1)” insert “or (5A)”.
3     (1)
Section 155 of that Act (visiting forces and allied headquarters: residence,
etc) is amended as follows.
      (2)
In subsection (4) for “allied” substitute “international military”.
      (3)
After subsection (5) insert—
30
“(5A)
Section 6(4) also applies to—
(a)
the emoluments paid by the Government of any designated
country to a person belonging to the EU civilian staff, not
being a British citizen, a British overseas territories citizen, a
British National (Overseas) or a British Overseas citizen, and
35
(b)
any tangible movable property the presence of which in the
United Kingdom is due solely to the presence in the United
Kingdom of such a person serving as part of that staff.
(5B)
A period during which any such person belonging to the EU civilian
staff as is referred to in subsection (5A) is in the United Kingdom by
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Finance (No. 4) Bill
Schedule 36 — International military headquarters, EU forces, etc
635

reason solely of that person belonging to that staff is not to be treated
for the purposes of this Act as a period of residence in the United
Kingdom or as creating a change of that person’s residence or
domicile.”
      (4)
In subsection (6), at the end insert—
5
““the EU civilian staff” means—
(a)
civilian personnel seconded by a member State to an
EU institution for the purposes of activities (including
exercises) relating to the preparation for, and
execution of, tasks mentioned in Article 43(1) of the
10
Treaty on European Union (tasks relating to a
common security and defence policy), as amended
from time to time, and
(b)
civilian personnel (other than locally hired
personnel)—
15
(i)
made available to the EU by a member State to
work with designated international military
headquarters or a force of a designated
country, or
(ii)
otherwise made available to the EU by a
20
member State for the purposes of activities of
the kind referred to in paragraph (a).”
ITEPA 2003
4     (1)
Section 303 of ITEPA 2003 (visiting forces and staff of designated allied
headquarters: relief from income tax) is amended as follows.
25
      (2)
In subsection (2)(a) for “allied” substitute “international military”.
      (3)
After subsection (4) insert—
“(4A)
No liability to income tax arises in respect of earnings if—
(a)
they are paid by the government of a designated country to a
person belonging to the EU civilian staff, and
30
(b)
that person is not a British citizen, a British overseas
territories citizen, a British National (Overseas) or a British
Overseas citizen.”
      (4)
In subsection (6)—
(a)
omit the “and” before the definition of “designated”, and
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(b)
after that definition insert “, and
“the EU civilian staff” means—
(a)
civilian personnel seconded by a member
State to an EU institution for the purposes of
activities (including exercises) relating to the
40
preparation for, and execution of, tasks
mentioned in Article 43(1) of the Treaty on
European Union (tasks relating to a common
security and defence policy), as amended
from time to time, and
45
(b)
civilian personnel (other than locally hired
personnel)—