Finance (No. 4) Bill (HC Bill 325)

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
5the effective date of the land transfer referred to in sub-paragraph (1)(a) of
the paragraph concerned is before 21 March 2012.

Section 216

SCHEDULE 35 Agreement between UK and Switzerland

Part 1 10Introduction

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-
15operation in the area of taxation, as amended by a protocol signed by
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
20in accordance with its terms (see Article 44), and

(d) references to a numbered Article are to the Article of that number in
the Agreement.

Part 2 The past

25Taxes affected

(1) The taxes affected by this Part are—

(a) income tax,

(b) capital gains tax,

(c) inheritance tax, and

(d) 30VAT.

(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
35chargeable transfer, and

(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

whichever of the taxes mentioned in sub-paragraph (1) is (or are) charged on
it.

Application of this Part

(1) This Part applies if—

(a) 5a one-off payment is levied in accordance with Part 2 of the
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
10that Article.

(2) The certificate is referred to in this Part as “the Part 2 certificate”.

Qualifying amounts

(1) The Part 2 certificate applies to taxable amounts in respect of which the
conditions in sub-paragraph (2) are met.

(2) 15The conditions are—

(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) 20The necessary link is—

(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) 25in any other case, that the amount forms part of or is represented by
the assets comprised in the relevant capital by reference to which the
one-off payment was calculated (referred to in the Agreement as C_r).

(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
30P.

(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”.

35Eligibility for clearance

(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
40investigations etc), and

(b) Article 12(1) does not apply (wrongful behaviour in relation to non-
UK domiciled status).

(3) Otherwise, P is “not eligible for clearance”.

Effect if P eligible for clearance

(1) This paragraph sets out the effect of the Part 2 certificate if P is eligible for
clearance.

(2) 5P ceases to be liable to tax on qualifying amounts.

(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
10United Kingdom, and

(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
15credit allowable against the tax due from P taking account of that amount.

(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
20representing the amount).

(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
25beneficial outcome for P.

(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
30of the relevant capital (C_r).

Ceasing to be liable to tax

(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
35liable to be brought into account in assessing the income tax or capital gains
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
40value is included in the amount is no longer due from P.

(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

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
5liability to tax on any other amount, and

(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
10and it were found that the tax assessed on any other amount should have
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.

15Effect if P not eligible for clearance

(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) 20The one-off payment is to be applied for the purposes of sub-paragraph
(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) 25The order is—

(a) first, for VAT,

(b) then, for income tax,

(c) then, for capital gains tax, and

(d) finally, for inheritance tax.

30Interest, penalties etc

(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
35it were a credit allowable against the tax due from P taking account of a
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) 40an amount of income on which income tax is charged,

(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.

(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 5Nothing in this Part entitles any person to a repayment or refund of tax, save
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

(1) 10This paragraph explains how paragraph 4(2) is to be read for each
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
15Kingdom,

(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
20account in an assessment to income tax or, as the case may be, capital
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) 25“the taxable event” takes place when the chargeable transfer is made
(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
30transfer.

(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
35prescribed accounting period in which P is required to account for
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
401994 or a direction given under regulation 81 of the Income Tax (PAYE)
Regulations 2003 (S.I. 2003/2682S.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.

Part 3 The future: income tax and capital gains tax

Taxes affected

13 The taxes affected by this Part are—

(a) 5income tax, and

(b) capital gains tax.

Application of this Part

(1) This Part applies if—

(a) a sum is levied under Article 19 on an amount of income or a gain of
10a person, and

(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
15of a person,

(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
20payment).

(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
25amount”,

(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
30may be, the tax finality payment made on it is referred to as “the
transferred sum”.

Effect of relevant certificate

(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
35year.

(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
40tax due from P for the applicable year.

(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.

(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

(1) 5P may make an election under this paragraph in respect of the underlying
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) 10a certificate is issued to P under Article 30(1) or the Joint Declaration
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) 15the amount is required to be brought into account in assessing the
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
20all the relevant certificates relating to the underlying account.

(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) 25Section 143 of TIOPA 2010 (taking account of special withholding tax in
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 30Other than a credit allowed under Part 3 of TIOPA 2010, any credit for
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

(1) 35Sub-paragraph (2) applies if the amount of a credit allowable under
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) 40Nothing in this Part entitles any person to a repayment or refund of tax, save
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—

(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 5The Joint Declaration does not count for the purposes of section 136(6)(b) of
TIOPA 2010 (definition of “special withholding tax”) as a corresponding
provision of international arrangements.

Part 4 The future: inheritance tax

10Taxes affected

20 This Part affects inheritance tax.

Application of this Part

(1) This Part applies if—

(a) an amount is withheld under Article 32(2) in respect of relevant
15assets of a deceased person (“P”), and

(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
20referred to as “the cleared assets”.

(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

(1) The cleared assets are to be treated as if they were excluded property in
25determining the value of P’s estate immediately before P’s death.

(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
30affect any liability to inheritance tax on the rest of P’s estate, and

(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
35chargeable transfer and it were found that the inheritance tax charged on the
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.

(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

(1) 5This paragraph applies if the cleared assets for each of the Article 32
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) 10The person who delivers the account or further account may elect to
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) 15An election may only be made under this paragraph if it is accompanied by
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) 20the amounts withheld under Article 32(2) are instead to be treated as
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 25Nothing in this Part entitles any person to a repayment or refund of tax, save
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 30General provisions

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).

35Amounts recoverable as if they were VAT

(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) 40But in the application of Part 2 to such amounts—

(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) 5the value of the supply shown in the invoice is “untaxed” if the
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.

10General interpretation

(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
  15includes an amended assessment or determination (and “assess” is to
  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;

• 20“EUSA” means the agreement dated 26 October 2004 between the
  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;

• 25“HMRC” means Her Majesty’s Revenue and Customs;

• “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
  30meaning given in section 3 of IHTA 1984;

• “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) 35A reference to a person being “liable” includes being liable jointly with
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) 40if the amount is an amount of income or a chargeable gain, a
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
45transferred by a chargeable transfer, a reference to the inheritance tax
due on the value transferred by the chargeable transfer (calculated
with that amount brought into account),