Finance (No. 2) Bill

Session 2012 - 13
Internet Publications
Other Bills before Parliament

Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 7 — Remittance basis: exempt property
196

      (3)
After subsection (4) insert—
“(4A)
Where exempt property has been lost, stolen or destroyed, the first
and second cases do not apply in relation to the property during any
period—
(a)
beginning with the time at which it was lost, stolen or
5
destroyed, and
(b)
(if lost or stolen) ending with the time at which it is recovered.
(4B)
The third case is where a compensation payment is released in
respect of exempt property that has been lost, stolen or destroyed.”
      (4)
In subsection (6), after “exempt property” insert “by virtue of the first or
10
second case”.
4
After section 809YE insert—
“809YF
Exception to section 809Y: compensation taken offshore or invested
(1)
Section 809Y(1) does not apply to property if—
(a)
it ceases to be exempt property because a compensation
15
payment in respect of it is released, and
(b)
conditions A and B are met.
(2)
Condition A is that the whole of the compensation payment is taken
offshore or used by a relevant person to make a qualifying
investment within the period of 45 days beginning with the day on
20
which the payment is released.
(3)
Condition B is that, if Condition A is satisfied wholly or in part by
using the compensation payment to make a qualifying investment,
the remittance basis user makes a claim for relief under subsection
(4) on or before the first anniversary of the 31 January following the
25
tax year in which the payment is released.
(4)
If section 809Y(1) does not apply to property by virtue of subsection
(1), the income and gains treated under section 809X as not remitted
to the United Kingdom continue to be treated after the compensation
payment is released as not remitted to the United Kingdom even
30
though the property has ceased to be exempt property.
(5)
But nothing in subsection (4) prevents anything done in relation to
any part of the compensation payment after that payment is taken
offshore (or used to make a qualifying investment) from counting as
a remittance of the underlying income or gains to the United
35
Kingdom at the time when the thing is done.
(6)
Treat the compensation payment as containing or deriving from an
amount of each kind of income and gain mentioned in section
809Q(4)(a) to (h) equal to the amount of that kind of income or gain
contained in the exempt property when it was brought to, or
40
received or used in, the United Kingdom (as mentioned in section
809X).
(7)
Where Condition A was met by using the compensation payment to
make a qualifying investment—
(a)
the business investment provisions apply to the income and
45
gains that continue, by virtue of subsection (4), to be treated

Finance (No. 2) Bill
Schedule 7 — Remittance basis: exempt property
197

as not remitted as they apply to income or gains that are
treated under section 809VA(2) as not remitted, and
(b)
if the investment was made using more than just the
compensation payment, treat only the part of the investment
made using the payment as “the investment” for the
5
purposes of those provisions.”
5     (1)
Section 809Z (public access rule: general) is amended as follows.
      (2)
In subsection (1), for “A to D” substitute “B and C”.
      (3)
Omit subsection (2).
      (4)
After subsection (8) insert—
10
“(8A)
But if the property is lost or stolen—
(a)
the relevant period ends with the time at which it is lost or
stolen, and
(b)
a new relevant period begins with its importation or the time
at which it is recovered.”
15
      (5)
Omit subsection (10).
6
Omit section 809Z1 (public access rule: relevant VAT relief).
7     (1)
Section 809Z4 (temporary importation rule) is amended as follows.
      (2)
In subsection (1), after “days” insert “(subject to any increase under
subsection (3B))”.
20
      (3)
In subsection (3)—
(a)
before paragraph (a) insert—
“(za)
the property meets the public access rule,”,
(b)
after paragraph (b) insert—
“(ba)
subsection (3A) applies to the property,”, and
25
(c)
in paragraph (d) for “or 809YC(2)” substitute “, 809YC(2) or
809YF(4)”.
      (4)
After that subsection insert—
“(3A)
This subsection applies to the property if—
(a)
it is not available to be used or enjoyed in the United
30
Kingdom by or for the benefit of a relevant person because it
has been lost, stolen or destroyed,
(b)
(if lost or stolen) it has not been recovered, and
(c)
no compensation payment has been released in respect of it.
(3B)
If—
35
(a)
property that has been lost or stolen is recovered,
(b)
the first day after the day on which it is recovered is a
countable day, and
(c)
excluding that countable day there have already been 231 or
more countable days in relation to the property,
40

the number of countable days specified in subsection (1) is read as
being increased by the number necessary for there to be 45 countable
days beginning with the countable day mentioned in paragraph (b).”

Finance (No. 2) Bill
Schedule 8 — Gains from contracts for life insurance etc
198

      (5)
Omit subsections (4) to (10).
8
In section 809Z6 (exempt property: other interpretation), after subsection (4)
insert—
“(5)
References to property being lost, stolen or destroyed are to the
property being lost, stolen or destroyed whilst in the United
5
Kingdom.
(6)
“Compensation payment”, in relation to property that has been lost,
stolen or destroyed, means any payment of compensation (whether
under an insurance policy or otherwise) in respect of the property.
(7)
A compensation payment is “released” on the day on which it first
10
becomes available for use in the United Kingdom by or for the
benefit of any relevant person.
(8)
Property that has been lost or stolen is “recovered” on the day on
which it becomes available to be used or enjoyed in the United
Kingdom by or for the benefit of a relevant person.”
15
9
The amendments made by paragraphs 3, 4, 5(4), 7(2), (3)(b) and (c) and (4)
and 8 have effect in relation to property that is lost, stolen or destroyed on or
after 6 April 2013.
10
The other amendments made by this Schedule have effect—
(a)
in relation to property that is not in the United Kingdom on 6 April
20
2013, as from that date, and
(b)
in relation to property that is in the United Kingdom on that date, as
from the time when it ceases to be in the United Kingdom or is lost
or stolen.
11
In the case of property that falls within paragraph 10(b) by virtue of being
25
lost or stolen, any period that is a period of importation in relation to the
property for the purposes of section 809Z4 of ITA 2007 ends with the time at
which it is lost or stolen.
Schedule 8
Section 24

Gains from contracts for life insurance etc
30
1
Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance
etc) is amended as follows.
2
In section 476 (special rules: foreign policies) in subsection (2)—
(a)
after the entry relating to section 474(3) to (5) insert “and”,
(b)
omit the entry relating to section 528,
35
(c)
omit the “and” after the entry relating to sections 531 to 534, and
(d)
omit the entry relating to section 536(6).
3
For section 528 substitute—
“528
Reduction in amount charged on basis of non-UK residence where
individual liable for tax
40
(1)
Subsection (2) applies if—

Finance (No. 2) Bill
Schedule 8 — Gains from contracts for life insurance etc
199

(a)
an individual is liable for tax charged on a gain from a policy
of life insurance or a capital redemption policy, and
(b)
there are one or more days in the material interest period on
which the individual is not UK resident.
(2)
In determining the individual’s liability for tax, the gain on which
5
the tax is charged in the case of the individual is to be reduced by the
appropriate fraction.
(3)
The appropriate fraction is—

where—
A is the number of days in the material interest period which are
10
days falling within subsection (1)(b), and
B is the number of days in the material interest period.
(4)
In subsection (2) the reference to the gain is to be read in accordance
with section 463A(4), 463D(4) or 463E(3) (which relates to restricted
relief qualifying policies) if applicable.
15
(5)
In this section “the material interest period” means so much of the
policy period as during which the individual meets condition A, B or
C in section 465 in relation to the policy (subject to subsection (7)).
(6)
Subsections (7) and (8) apply if, before the chargeable event, there is
an assignment falling within section 487(c) in relation to the policy
20
where the individual is the assignee.
(7)
There is to be added to the material interest period any part of the
policy period falling before the assignment—
(a)
during which the assignor meets condition A, B or C in
section 465 in relation to the policy, and
25
(b)
which is not included in the material interest period under
subsection (5).
(8)
In relation to any period added to the material interest period under
subsection (7), in subsection (1)(b) the reference to the individual is
to be read as a reference to the assignor.
30
(9)
For the purposes of subsections (5) and (7), in section 465(2) to (4)
references to the rights under the policy are to be read as including
references to a share of those rights.
(10)
In this section “the policy period” means the period for which the
policy has run before the chargeable event occurs.
35
(11)
If the policy is a policy of life insurance which is a new policy in
relation to another policy, for the purposes of subsection (10) the new
policy is to be taken to have run—
(a)
from the issue of the other policy, or
(b)
if it also was a new policy in relation to an earlier policy, from
40
the issue of the earlier policy,

and so on; and in subsections (5) to (9) references to the policy are to
be read accordingly as including any relevant earlier policy.

Finance (No. 2) Bill
Schedule 8 — Gains from contracts for life insurance etc
200

(12)
In subsection (11) “new policy” has the meaning given in paragraph
17 of Schedule 15 to ICTA.
528A
Reduction in amount charged on basis of non-UK residence of
deceased person
(1)
Subsection (3) applies if—
5
(a)
personal representatives are liable for tax charged on a gain
from a policy of life insurance or a capital redemption policy
under section 466, and
(b)
there were one or more days in the material interest period on
which the deceased was not UK resident.
10
(2)
Subsection (3) also applies if—
(a)
trustees are liable for tax charged on a gain from a policy of
life insurance or a capital redemption policy under section
467 where—
(i)
of conditions A to D in that section, only condition B
15
is met, and
(ii)
the absent settlor condition which is met is the one in
subsection (4)(b) of that section (deceased settlor),
(b)
there were one or more days in the material interest period on
which the deceased was not UK resident, and
20
(c)
the deceased was UK resident when the deceased died.
(3)
In determining the liability for tax of the personal representatives or
trustees, the gain on which the tax is charged in the case of the
personal representatives or trustees is to be reduced by the
appropriate fraction.
25
(4)
The appropriate fraction is—

where—
A is the number of days in the material interest period which are
days falling within subsection (1)(b) or (2)(b) (as the case may
be), and
30
B is the number of days in the material interest period.
(5)
In subsection (3) the reference to the gain is to be read in accordance
with section 463C(8) (which relates to restricted relief qualifying
policies) if applicable.
(6)
In this section “the material interest period” means so much of the
35
policy period falling before the deceased’s death as during which the
deceased met condition A, B or C in section 465 in relation to the
policy (subject to subsection (8)).
(7)
Subsections (8) and (9) apply if, before the deceased’s death, there
was an assignment falling within section 487(c) in relation to the
40
policy where the deceased was the assignee.
(8)
There is to be added to the material interest period any part of the
policy period falling before the assignment—
(a)
during which the assignor met condition A, B or C in section
465 in relation to the policy, and
45

Finance (No. 2) Bill
Schedule 8 — Gains from contracts for life insurance etc
201

(b)
which is not included in the material interest period under
subsection (6).
(9)
In relation to any period added to the material interest period under
subsection (8), in subsection (1)(b) or (2)(b) the reference to the
deceased is to be read as a reference to the assignor.
5
(10)
For the purposes of subsections (6) and (8), in section 465(2) to (4)
references to the rights under the policy are to be read as including
references to a share of those rights.
(11)
In this section “the policy period” means the period for which the
policy has run before the chargeable event occurs.
10
(12)
If the policy is a policy of life insurance which is a new policy in
relation to another policy, for the purposes of subsection (11) the new
policy is to be taken to have run—
(a)
from the issue of the other policy, or
(b)
if it also was a new policy in relation to an earlier policy, from
15
the issue of the earlier policy,

and so on; and in subsections (6) to (10) references to the policy are
to be read accordingly as including any relevant earlier policy.
(13)
In subsection (12) “new policy” has the meaning given in paragraph
17 of Schedule 15 to ICTA.”
20
4
Omit section 529 (exceptions to section 528).
5     (1)
Section 536 (top slicing relieved liability: one chargeable event) is amended
as follows.
      (2)
In subsection (6) for the words from “from” to the end substitute “reduced
under section 528 in the case of the individual.”
25
      (3)
For subsection (7) substitute—
“(7)
If in the case of the individual the gain is reduced under section 528,
for steps 1 and 3 in subsection (1) N is reduced by the number of
complete years consisting wholly of days falling within section
528(1)(b) (including days falling within section 528(1)(b) by virtue of
30
section 528(8)).”
6
In section 552 of ICTA (information: duty of insurers) after subsection (13)
insert—
“(14)
For the purposes of this section no account is to be taken of the effect
of sections 528 and 528A of ITTOIA 2005.”
35
7     (1)
The amendments made by this Schedule have effect in relation to—
(a)
any policy of life insurance issued in respect of an insurance made on
or after 6 April 2013, or
(b)
any contract constituting a capital redemption policy made on or
after that date.
40
      (2)
The amendment made by paragraph 3 above has effect in relation to any
insurance or contract made before 6 April 2013 if on or after that date—
(a)
the policy or contract is varied with the result that there is an increase
in the benefits secured,

Finance (No. 2) Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
202

(b)
there is or was an assignment (or assignation) of rights, or a share of
the rights, conferred by the policy or contract (whether or not for
money’s worth) to the individual or deceased, or
(c)
some or all of the rights conferred by the policy or contract become
or became held as a security for a debt of the individual or deceased,
5

and the other amendments made by this Schedule have effect in relation to
the insurance or contract accordingly.
      (3)
For the purposes of sub-paragraph (2)(a) an exercise of rights conferred by a
policy or contract is to count as a variation of the policy or contract.
      (4)
In the case of a policy or contract treated under section 473A of ITTOIA 2005
10
as a single policy or contract, for the purposes of sub-paragraphs (1) and (2)
the date on which the insurance or contract is made is the date on which, as
the case may be—
(a)
the first insurance is made in respect of which the connected policies
are issued, or
15
(b)
the first of the connected contracts is made.
Schedule 9
Section 25

Qualifying insurance policies
Part 1
Amendments of Schedule 15 to ICTA etc
20
1
Schedule 15 to ICTA (qualifying insurance policies) is amended as follows.
2
Before Part 1 insert—
“Part A1
Premium limit for qualifying policies
Premium limit for qualifying policies to apply from 6 April 2013
25
A1    (1)
Sub-paragraph (2) applies if—
(a)
an event falling within sub-paragraph (3) occurs,
(b)
apart from sub-paragraph (2), the policy to which the event
relates would be a qualifying policy after the event, and
(c)
an individual who is a beneficiary under that policy is in
30
breach of the premium limit for qualifying policies.
      (2)
That policy is not to be a qualifying policy after the event.
      (3)
The events falling within this sub-paragraph are—
(a)
the issue of a policy in respect of an insurance made on or
after 6 April 2013;
35
(b)
the variation of a policy on or after 6 April 2013 where as a
result of the variation—
(i)
the period over which premiums are payable
under the policy is or could be lengthened, or