(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) 5in 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
10P.

(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”.

15Eligibility for clearance

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
20investigations 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

6 (1) 25This 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.

(3) Sub-paragraph (2) does not apply to a qualifying amount if—

(a) the amount was held in the United Kingdom,

(b) 30at 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

(c) after that point (but before the start date) it began to be held in
Switzerland.

(4) 35Instead, 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.

(5) The meaning of tax due “taking account of” an amount is explained in Part
5 of this Schedule.

(6) 40The 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).

(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
5beneficial 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
10of the relevant capital (C_r).

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
15liable 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
20value 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) 25But—

(a) ceasing to be liable to tax on a qualifying amount does not affect P’s
liability 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
30calculating 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
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) 35For 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

8 (1) This paragraph sets out the effect of the Part 2 certificate if P is not eligible
for clearance.

(2) 40The 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
(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—

(a) first, for VAT,

(b) 5then, for income tax,

(c) then, for capital gains tax, and

(d) finally, for inheritance tax.

Interest, penalties etc

9 (1) Where, by virtue of this Part, P ceases to be liable to tax on a qualifying
10amount, 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
qualifying amount, the credit may also be used to offset any ancillary charge
15directly 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,

(b) a chargeable gain,

(c) 20the 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
25connected 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
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
30the 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
description of taxable amount.

(2) For income and chargeable gains—

(a) 35the 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,

(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
40the 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
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
(or, in the case of a potentially exempt transfer, when death occurs),
5and

(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.

(4) For the value of supplies on which VAT is charged—

(a) 10“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
output tax on the supply.

(5) 15Paragraph 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)
Regulations 2003 (S.I. 2003/2682)).

20Refund 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

25Taxes affected

13 The taxes affected by this Part are—

(a) income tax, and

(b) capital gains tax.

Application of this Part

14 (1) 30This Part applies if—

(a) a sum is levied under Article 19 on an amount of income or a gain of
a 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) 35This Part also applies if—

(a) a retention is made under EUSA from an amount of income or a gain
of a person,

(b) a tax finality payment, as contemplated by the Joint Declaration, is
made on the same income or gain, and

(c) 40a certificate is issued to the person under the Joint Declaration in
respect of the making of that payment (or payments that include that
payment).

(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”,

(d) 5the 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
10transferred 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.

(2) 15“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.

(4) 20If 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.

25Election

16 (1) P 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) 30In 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
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
35underlying account, and

(c) the 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) 40An election may only be made under this paragraph if it is accompanied by
all 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) Section 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
5withholding tax.

Other credits to be allowed first

17 Other 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
10effect is given to paragraph 15(3).

Repayments

18 (1) Sub-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) 15The 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
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
20remaining 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 25The 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

30Taxes affected

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
35assets 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
referred 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.

5Effect 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.

(2) As a result, any ancillary charge directly connected with those assets is also
extinguished.

(3) 10But—

(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

(b) that liability remains what it would have been, had the cleared assets
not been treated as excluded property.

(4) 15Accordingly, 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
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
20remains 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

23 (1) 25This 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) 30The 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) 35An 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) 40the 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 Nothing 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
5due from the person on the value transferred by the chargeable transfer.

Part 5 General provisions

Information exchange

25 No obligation of secrecy (whether imposed by statute or otherwise) prevents
10HMRC 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

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
15(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—

(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
20in 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
amount otherwise recoverable under paragraph 5(3) of that Schedule
has not been recovered, and

(d) 25“ceasing to be liable” to tax on the value of that supply means that the
amount otherwise recoverable is no longer recoverable.

General interpretation

27 (1) In this Schedule—

• “ancillary charge” means any interest, penalty, surcharge or other
  30ancillary charge;

• “assessment”, in relation to a tax, includes a determination and also
  includes an amended assessment or determination (and “assess” is to
  be read accordingly);

• “chargeable gain” means a gain that is a chargeable gain for the
  35purposes 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
  European Community and the Swiss Confederation providing for
  measures equivalent to those laid down in Council Directive 2003/
  4048/EC on taxation on savings income in the form of interest
  payments;

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

• “qualifying amount” is defined in paragraph 4;

Finance BillPage 638

• “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;

• 5“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
10others.

(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
15reference 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
20due on the value transferred by the chargeable transfer (calculated
with that amount brought into account),

(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
25account (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
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.

Section 218

30SCHEDULE 36 International military headquarters, EU forces, etc

FA 1960

1 (1) Section 74A of FA 1960 (visiting forces and allied headquarters: stamp duty
land tax exemptions) is amended as follows.

(2) 35In subsection (4)—

(a) for “allied”, in the first place, substitute “international military”, and

(b) omit paragraph (c).

(3) In subsection (5)—

(a) omit paragraph (a),

(b) 40in paragraph (b), after “Council” insert “made for giving effect to an
international agreement”, and

(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
5“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—

“(5A) 10Section 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

(b) 15any 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
20reason 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—

• 25““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
  30Treaty 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)—

  (i)

  35made 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
  40member 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.

(2) 45In subsection (2)(a) for “allied” substitute “international military”.