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Finance (No. 2) Bill


Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

189

 

Schedule 6

Section 19

 

Employment income: duties performed in the UK and overseas

Part 1

Apportionment of earnings

1          

Part 2 of ITEPA 2003 (employment income: charge to tax) is amended as

5

follows.

2          

In section 15 (earnings for year when employee UK resident), as amended

by Schedule 43 to this Act, in subsection (5)—

(a)   

after paragraph (a) omit “and”, and

(b)   

after paragraph (b) insert “, and

10

(c)   

section 41ZA (which is about determining the extent

to which general earnings are in respect of United

Kingdom duties).”

3          

In Chapter 5 (taxable earnings: remittance basis rules and rules for non-UK

resident employees), after section 41 insert—

15

“Apportionment of earnings

41ZA    

Basis of apportionment

The extent to which general earnings are in respect of duties

performed in the United Kingdom is to be determined under this

Chapter on a just and reasonable basis.”

20

Part 2

Remittance basis of taxation: special mixed fund rules

4          

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

5          

In section 809Q (sections 809L and 809P: transfers from mixed funds), after

subsection (1) insert—

25

“(1A)   

But this section must be read subject to section 809RA.”

6          

After section 809R insert—

“809RA  

Special mixed fund rules for certain employment cases

(1)   

This section applies if—

(a)   

an individual has general earnings from an employment for

30

a tax year,

(b)   

those earnings include both general earnings within section

15(1) of ITEPA 2003 (“section 15(1) earnings”) and general

earnings within section 26(1) of that Act (“section 26(1)

earnings”),

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(c)   

at least some of the section 15(1) earnings, or sums deriving

(wholly or in part, and directly or indirectly) from at least

some of the section 15(1) earnings, are paid into an account in

that tax year at a time (a “relevant time”) when the account is

a qualifying account of the individual, and

40

 
 

Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

190

 

(d)   

at least some of the section 26(1) earnings, or sums deriving

(wholly or in part, and directly or indirectly) from at least

some of the section 26(1) earnings, are also paid into the

account in that tax year at a relevant time.

(2)   

If this section applies, the composition of each transfer made from

5

the account in that tax year at a relevant time is to be determined as

follows—

   

Step 1 Suppose that all the condition A transfers made from the

account in the tax year at a relevant time had been a single transfer

made from the account at the end of the tax year.

10

   

Step 2 Suppose that all the other transfers made from the account in

the tax year at a relevant time had been a single offshore transfer

made at the end of the tax year immediately after the single transfer

mentioned in step 1.

   

Step 3 Applying those suppositions—

15

(a)   

find under section 809Q(3) the extent to which the single

transfer mentioned in step 1 is of the individual’s income or

chargeable gains, and

(b)   

find under section 809R(4) the content of the single offshore

transfer mentioned in step 2.

20

   

Step 4 Each transfer made from the account in the tax year at a

relevant time is to be treated as containing the specified proportion

of each kind of income or capital contained in the relevant deemed

transfer.

   

“The specified proportion” is the amount of the transfer divided by

25

the amount of the relevant deemed transfer.

   

“The relevant deemed transfer” is—

(a)   

if the transfer is a condition A transfer, the single transfer

mentioned in step 1, and

(b)   

otherwise, the single offshore transfer mentioned in step 2.

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(3)   

Subsection (2) applies in determining the composition of a transfer

for the purposes of sections 809Q and 809R but it does not otherwise

affect the date on which a transfer is considered to occur for the

purposes of this Chapter.

(4)   

If the tax year is the tax year in which the account becomes a

35

qualifying account, for the purpose of applying section 809Q(3) in

relation to the single transfer mentioned in step 1 of subsection (2),

treat the part of the tax year falling before the qualifying date for the

account as a separate tax year.

(5)   

If the account ceases to be a qualifying account of the individual

40

during the tax year other than as a result of a breach of the deposit

rule—

(a)   

subsection (2) has effect as if references to the end of the tax

year were to the end of the day on which the account ceases

to be a qualifying account, and

45

(b)   

for the purpose of applying section 809Q(3) in relation to the

single transfer mentioned in step 1 of subsection (2), treat the

part of the tax year falling after the day mentioned in

paragraph (a) as a separate tax year.

 
 

Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

191

 

(6)   

A transfer from the account is a “condition A transfer” if and to the

extent that—

(a)   

condition A in section 809L is met, and

(b)   

either—

(i)   

the property or consideration for the service is

5

(wholly or in part), or derives (wholly or in part, and

directly or indirectly) from, the transfer, or

(ii)   

the transfer, or anything deriving (wholly or in part,

and directly or indirectly) from the transfer, is used as

mentioned in section 809L(3)(c).

10

(7)   

A transfer from the account is an “other transfer” if and to the extent

that it is not a condition A transfer.

(8)   

Treat a transfer as an “other transfer” if and to the extent that, at the

end of the tax year—

(a)   

it is not a condition A transfer, and

15

(b)   

on the basis of the best estimate that can reasonably be made

at that time, it will not become a condition A transfer.

(9)   

If the account ceases to be a qualifying account of the individual

during the tax year other than as a result of a breach of the deposit

rule, subsection (8) has effect as if the reference to the end of the tax

20

year were to the end of the day on which the account ceases to be a

qualifying account.

(10)   

“Qualifying account” and “the qualifying date” for an account are

defined in section 809RB.

(11)   

For the purposes of this section and sections 809RB to 809RD—

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(a)   

“employment” is to be read in accordance with section 4(1) of

ITEPA 2003, and includes an office (as read in accordance

with section 5(3) of that Act),

(b)   

whether general earnings are “for” a tax year is to be

determined as for the purposes of the employment income

30

Parts of ITEPA 2003 (see section 3(2) of that Act),

(c)   

a reference to anything “paid into” an account includes

anything credited to the account by whatever means, and

(d)   

references to a breach of the deposit rule are to be read in

accordance with section 809RC.

35

809RB   

Qualifying accounts

(1)   

An individual may by notice to the Commissioners nominate an

account to be a qualifying account of the individual for the purposes

of section 809RA.

(2)   

The notice must specify the qualifying date for the account.

40

(3)   

“The qualifying date” for the account is the first date on which there

is paid into the account sums falling within subsection (4) which (in

total) are more than £10.

(4)   

A sum falls within this subsection if it is, or derives wholly (whether

directly or indirectly) from, general earnings of the individual from

45

an employment for a tax year which is a relevant tax year in relation

to the employment.

 
 

Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

192

 

(5)   

A tax year is a “relevant” tax year in relation to an employment if the

general earnings which the individual has for the tax year from the

employment include both general earnings within section 15(1) of

ITEPA 2003 and general earnings within section 26(1) of that Act.

(6)   

The individual may withdraw the nomination by giving a further

5

notice to the Commissioners, specifying the date with effect from

which the nomination is withdrawn.

(7)   

A notice under subsection (1) or (6) must be in writing and include

such information as the Commissioners may reasonably require.

(8)   

A notice under subsection (1) or (6) must be given no later than—

10

(a)   

31 January in the tax year following the tax year in which

falls, as the case may be—

(i)   

the qualifying date for the account, or

(ii)   

the date with effect from which the nomination is

withdrawn, or

15

(b)   

such later date as the Commissioners may allow.

(9)   

If an individual nominates an account under this section, the account

is a “qualifying account” of the individual throughout the period—

(a)   

beginning with the qualifying date, and

(b)   

ending with the date before the earliest of the following

20

dates—

(i)   

the date on which the account is closed or ceases to be

an ordinary bank account held by and for the benefit

of the individual (alone or jointly with others);

(ii)   

the date with effect from which the nomination is

25

withdrawn under this section;

(iii)   

the qualifying date for another qualifying account of

the individual;

(iv)   

6 April in a tax year in which there is a breach of the

deposit rule which is not remedied or cannot be

30

remedied;

(v)   

6 April in a tax year for which the individual has no

general earnings within section 26(1) of ITEPA 2003.

(10)   

The account is not to be a qualifying account at all if—

(a)   

at any time on the qualifying date, the account is not an

35

ordinary bank account held by and for the benefit of the

individual (alone or jointly with others), or

(b)   

immediately before the qualifying date, the account has a

credit balance of more than £10.

(11)   

The account is not to be a qualifying account at all if the qualifying

40

date falls in a tax year—

(a)   

for which the individual has no general earnings within

section 26(1) of ITEPA 2003, or

(b)   

in which there is a breach of the deposit rule which is not

remedied or cannot be remedied.

45

(12)   

Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the

breach occurs on or after a date falling within subsection (9)(b)(i) to

(iii).

 
 

Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

193

 

(13)   

If, apart from this subsection, an individual might have nominated

two or more accounts for which the qualifying date would be the

same, the individual may nominate only one of those accounts.

(14)   

If, apart from this subsection, an account would be a qualifying

account of two or more individuals at any time, it is not to be a

5

qualifying account of either or any of them at that time or any other

time.

(15)   

For the purposes of this section an account is an “ordinary bank

account” if it is a cash account in a bank (whether a current or savings

account) where sums standing to the credit of the account from time

10

to time represent a debt owed by the bank to the account-holder.

809RC   

Breaches of the deposit rule

(1)   

There is a breach of the deposit rule if a prohibited sum is paid into

the account on or after the qualifying date.

(2)   

A breach of the deposit rule is remedied if, within 30 days beginning

15

with the day on which the individual became or ought reasonably to

have become aware of the payment of the prohibited sum, the

required amount is transferred out of the account by way of a single

one-off transfer.

(3)   

“The required amount” is an amount equal to—

20

(a)   

the prohibited sum, plus

(b)   

all the other prohibited sums (if any) that have been paid into

the account since that sum was paid in.

(4)   

If there are 3 breaches of the deposit rule in any 12 month period,

subsection (2) does not apply to the third breach and, accordingly,

25

the third breach cannot be remedied.

(5)   

The payment of a prohibited sum (“the later prohibited sum”) into

the account does not result in a breach of the deposit rule if—

(a)   

a breach resulting from an earlier payment of a prohibited

sum into the account is remedied, and

30

(b)   

the later prohibited sum is represented by the required

amount in relation to that breach.

(6)   

A “prohibited sum” is anything other than a sum that is, or derives

wholly (whether directly or indirectly) from, any of the following

kinds of income or capital—

35

(a)   

general earnings of the individual from an employment for a

tax year which is a relevant tax year in relation to the

employment,

(b)   

general earnings of the individual from an employment

which consist of money and are paid in a tax year which is a

40

relevant tax year in relation to the employment,

(c)   

an amount of specific employment income which, by virtue

of Part 6, 7 or 7A of ITEPA 2003 or any other enactment,

counts as employment income of the individual in respect of

an employment for a tax year which is a relevant tax year in

45

relation to the employment,

(d)   

interest on the account, or

 
 

Finance (No. 2) Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules

194

 

(e)   

consideration for the disposal of employment-related

securities or employment-related securities options in the

circumstances described in subsection (7).

(7)   

The circumstances are—

(a)   

the securities or options were acquired pursuant to a right or

5

opportunity available by reason of an employment of the

individual,

(b)   

the disposal is or occurs in conjunction with, or as soon as

reasonably practicable after, a relevant event involving those

securities or options, and

10

(c)   

the tax year in which the relevant event occurs is a relevant

tax year in relation to the employment.

(8)   

For the purposes of subsection (7) each of the following is a “relevant

event”—

(a)   

the acquisition mentioned in subsection (7)(a), and

15

(b)   

any event on the occurrence of which an amount (if positive)

counts as employment income by virtue of Part 7 of ITEPA

2003 or would do so but for—

(i)   

section 421E or 474 of that Act (exclusions: residence

etc), or

20

(ii)   

an election under section 430 or 431 of that Act.

(9)   

For the purposes of this section a tax year is a “relevant” tax year in

relation to an employment if—

(a)   

the individual has general earnings from the employment for

the tax year,

25

(b)   

those earnings include both general earnings within section

15(1) of ITEPA 2003 (“section 15(1) earnings”) and general

earnings within section 26(1) of that Act (“section 26(1)

earnings”),

(c)   

at least some of the section 15(1) earnings, or sums deriving

30

(wholly or in part, and directly or indirectly) from at least

some of the section 15(1) earnings, are paid into the account

in the tax year, and

(d)   

at least some of the section 26(1) earnings, or sums deriving

(wholly or in part, and directly or indirectly) from at least

35

some of the section 26(1) earnings, are also paid into the

account in the tax year.

(10)   

For the purposes of this section—

(a)   

“employment-related securities” has the meaning given in

section 421B(8) of  ITEPA 2003, and

40

(b)   

“employment-related securities options” has the meaning

given in section 471(5) of that Act.

809RD   

Effect where 30-day deadline is met

(1)   

This section applies if the required amount in relation to a breach of

the deposit rule was transferred out of the account in accordance

45

with section 809RC(2).

(2)   

Sections 809Q and 809R have effect as if—

(a)   

the intervening transactions had never taken place, and

 
 

Finance (No. 2) Bill
Schedule 7 — Remittance basis: exempt property

195

 

(b)   

each prohibited sum represented by the required amount

had instead been transferred directly (at the time that sum

was paid into the qualifying account) into the account or

other property into which the required amount was

transferred by virtue of the single one-off transfer.

5

(3)   

Each of the following is an “intervening transaction”—

(a)   

each payment into the qualifying account of a prohibited sum

represented by the required amount, and

(b)   

the single one-off transfer out of the qualifying account.

(4)   

If it is supposed under step 1 or 2 of section 809RA(2) that a single

10

transfer had been made in the intervening period, re-apply section

809Q or 809R in relation to that transfer taking account of subsection

(2).

(5)   

“The intervening period” is the period—

(a)   

beginning with the day on which the breach occurred, and

15

(b)   

ending with the day on which the single one-off transfer was

made in accordance with section 809RC(2).

(6)   

If more than one transfer of a sum equal to the required amount was

transferred out of the qualifying account within the 30-day grace

period, the first of those transfers is assumed to be the single one-off

20

transfer.

(7)   

“The 30-day grace period” is the period of 30 days mentioned in

section 809RC(2).”

Part 3

Commencement

25

7          

The amendments made by Part 1 of this Schedule have effect in relation to

earnings for the tax year 2013-14 and subsequent tax years.

8          

The amendments made by Part 2 of this Schedule have effect in relation to

transfers from a mixed fund that are made in the tax year 2013-14 or any

subsequent tax year.

30

Schedule 7

Section 20

 

Remittance basis: exempt property

1          

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2          

In section 809X(3) (exempt property: public access rule), for “sections 809Z

and 809Z1)” substitute “section 809Z)”.

35

3     (1)  

Section 809Y (property that ceases to be exempt property treated as

remitted) is amended as follows.

      (2)  

In subsection (2), for “either” substitute “any”.

 
 

 
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Revised 28 March 2013