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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

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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

15

(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

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(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

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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

15

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—

40

 
 

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

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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

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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

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(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

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(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

40

 
 

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

35

(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)—

 
 

 
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Revised 28 March 2012