Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
529

Special charging rules for miscellaneous income
87
In section 577 (territorial scope of charges in respect of miscellaneous
income), after subsection (2) insert—
“(2A)
If income arising to an individual who is UK resident arises in the
overseas part of a split year, it is to be treated for the purposes of this
5
section as arising to a non-UK resident.”
Special charging rules for relevant foreign income charged on remittance basis
88
In section 832 of ITTOIA 2005 (relevant foreign income charged on
remittance basis), for subsection (2) substitute—
“(2)
For any tax year for which the individual is UK resident, income tax
10
is charged on the full amount of so much (if any) of the relevant
foreign income as is remitted to the United Kingdom—
(a)
in that year, or
(b)
in the UK part of that year, if that year is a split year as
respects the individual.”
15
89    (1)
Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as
follows in consequence of the amendment made by the preceding
paragraph.
      (2)
In section 726 (non-UK domiciled individuals to whom remittance basis
applies), after subsection (4) insert—
20
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”
      (3)
In section 730 (non-UK domiciled individuals to whom remittance basis
applies), after subsection (4) insert—
25
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”
      (4)
In section 735 (non-UK domiciled individuals to whom remittance basis
applies), after subsection (4) insert—
30
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”
Special charging rules for capital gains
90
TCGA 1992 is amended as follows.
35
91    (1)
Section 2 (persons and gains chargeable to capital gains tax, and allowable
losses) is amended as follows.
      (2)
After subsection (1A) (inserted by Schedule 44 to this Act) insert—
“(1B)
If the year is a split year as respects an individual, the individual is
not chargeable to capital gains tax in respect of any chargeable gains
40
accruing to the individual in the overseas part of that year.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
530

(1C)
But subsection (1B)—
(a)
does not apply to chargeable gains in respect of which the
individual would have been chargeable to capital gains tax
under section 10, had the individual been not resident in the
UK for the year, and
5
(b)
is without prejudice to section 10A.”
      (3)
In subsection (2)—
(a)
after “the year of assessment” insert “or, where subsection (1B)
applies, the UK part of that year”, and
(b)
in paragraph (a), after “that year of assessment” insert “or that part
10
(as the case may be)”.
92    (1)
Section 3A (reporting limits) is amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a), after “year of assessment” insert “or, if that year is
a split year as respects the individual, the UK part of that year”, and
15
(b)
in paragraph (b), after “in that year” insert “or, as the case may be,
that part of the year”.
      (3)
In subsection (2), after “year of assessment” insert “(or the UK part of such a
year)”.
93    (1)
Section 12 (non-UK domiciled individuals to whom remittance basis
20
applies) is amended as follows.
      (2)
After subsection (2) insert—
“(2A)
If that tax year is a split year as respects the individual, the
chargeable gains are treated as accruing to the individual in the part
of the year (the overseas part or the UK part) in which the foreign
25
chargeable gains are so remitted.”
      (3)
In subsection (3), after “that year” insert “or, where applicable, that part of
the year”.
94
In section 13 (attribution of gains to members of non-resident companies),
after subsection (3) insert—
30
“(3A)
Subsection (2) does not apply in the case of a participator who is an
individual if—
(a)
the tax year in which the chargeable gain accrues to the
company is a split year as respects the participator, and
(b)
the chargeable gain accrues to the company in the overseas
35
part of that year.”
95
In section 16 (computation of losses), after subsection (3) insert—
“(3A)
If the person is an individual and the year is a split year as respects
that individual, subsection (3) also applies to a loss accruing to the
individual in the overseas part of that year.”
40
96
In section 16ZB (individual who has made election under section 16ZA:
foreign chargeable gains remitted in tax year after tax year in which accrue),
in subsection (1)(c), after “tax year” insert “or a part of the applicable tax
year”.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
531

97    (1)
Section 16ZC (individual who has made election under section 16ZA and to
whom remittance basis applies) is amended as follows.
      (2)
In subsection (3)—
(a)
in paragraph (a), after “that year” insert “or, if that year is a split year
as respects the individual, in the UK part of that year”, and
5
(b)
in paragraph (b), after “that year” insert “or they are so remitted in
that year but it is a split year as respects the individual and they are
so remitted in the overseas part of the year”.
      (3)
In subsection (7), in the definition of “relevant allowable losses”, after “tax
year” insert “or a part of the tax year”.
10
98
In section 86 (attribution of gains to settlors with interest in non-resident or
dual resident settlements), in subsection (4)(a), after “the year” insert “or if,
as respects the settlor, the year is a split year, in the UK part of that year”.
99
In section 87 (non-UK resident settlements: attribution of gains to
beneficiaries), after subsection (6) insert—
15
“(7)
If the relevant tax year is a split year as respects a beneficiary of the
settlement—
(a)
the amount on which the beneficiary is chargeable to capital
gains tax by virtue of this section for that year (in respect of
the settlement) is a portion of the amount on which the
20
beneficiary would have been so chargeable if the relevant tax
year had not been a split year, and
(b)
the portion is the portion attributable to the UK part of the
relevant tax year calculated on a time apportionment basis.”
Trustees of a settlement
25
100
In section 69 of TCGA 1992 (trustees of settlements), after subsection (2D)
insert—
“(2DA)
A trustee who is resident in the United Kingdom for a tax year is to
be treated for the purposes of subsections (2A) and (2B) as if he or she
were not resident in the United Kingdom for that year if—
30
(a)
the trustee is an individual,
(b)
the individual becomes or ceases to be a trustee of the
settlement during the tax year,
(c)
that year is a split year as respects the individual, and
(d)
in that year, the only period when the individual is a trustee
35
of the settlement falls wholly within the overseas part of the
year.
(2DB)
Subsection (2DA) is subject to subsection (2D) and, accordingly, an
individual who is treated under subsection (2DA) as not resident is,
in spite of that, to be regarded as resident whenever the individual
40
acts as mentioned in subsection (2D).”
101
In section 475 of ITA 2007 (residence of trustees), after subsection (6) insert—
“(7)
Subsection (8) applies if—
(a)
an individual becomes or ceases to be a trustee of the
settlement during a tax year,
45

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
532

(b)
that year is a split year as respects the individual, and
(c)
the only period in that year when the individual is a trustee
of the settlement falls wholly within the overseas part of the
year.
(8)
The individual is to be treated for the purposes of subsections (4) and
5
(5) as if he or she had been non-UK resident for the year (and hence
for the period in that year when he or she was a trustee of the
settlement).
(9)
But subsection (8) is subject to subsection (6) and, accordingly, an
individual who is treated under subsection (8) as having been non-
10
UK resident is, in spite of that, to be treated as UK resident whenever
the individual acts as mentioned in subsection (6).”
Definitions in enactments relating to income tax and CGT
102   (1)
Section 288 of TCGA 1992 (interpretation) is amended as follows.
      (2)
In subsection (1), insert the following definition in the appropriate place—
15
““split year”, as respects an individual, means a tax year that, as
respects that individual, is a split year within the meaning of
Part 3 of Schedule 43 to the Finance Act 2013 (statutory
residence test: split year treatment);”.
      (3)
After subsection (1ZA) insert—
20
“(1ZB)
A reference in this Act to “the overseas part” or “the UK part” of a
split year is to be read in accordance with Part 3 of Schedule 43 to the
Finance Act 2013 (statutory residence test: split year treatment).”
103
In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), insert
the following entries in the appropriate places—
25

“the overseas part
section 989 of ITA 2007”,

“split year
section 989 of ITA 2007”,

and

“the UK part
section 989 of ITA 2007”.

104
In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), insert
30
the following entries in the appropriate places—

“the overseas part
section 989 of ITA 2007”,

“split year
section 989 of ITA 2007”,

and

“the UK part
section 989 of ITA 2007”.

35
105
In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts),

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
533

insert the following definitions in the appropriate places—
““the overseas part”, in relation to a split year, has the meaning
given in Part 3 of Schedule 43 to FA 2013 (statutory residence
test: split year treatment);”,
““split year”, in relation to an individual, means a tax year that,
5
as respects that individual, is a split year within the meaning
of Part 3 of Schedule 43 to FA 2013 (statutory residence test:
split year treatment);”, and
““the UK part”, in relation to a split year, has the meaning given
in Part 3 of Schedule 43 to FA 2013 (statutory residence test:
10
split year treatment);”.
106
In Schedule 4 to that Act (index of defined expressions), insert the following
entries in the appropriate places—

“the overseas part
section 989”,

“split year
section 989”, and

15

“the UK part
section 989”.

Part 4
Anti-avoidance
Introduction
107
This Part of this Schedule—
20
(a)
explains when an individual is to be regarded for the purposes of
certain enactments as temporarily non-resident,
(b)
defines the year of departure and the period of return for the
purposes of those enactments,
(c)
makes consequential amendments to certain enactments containing
25
special rules for temporary non-residents, and
(d)
inserts some more special rules for temporary non-residents in
certain cases.
Meaning of temporarily non-resident
108   (1)
An individual is to be regarded as “temporarily non-resident” if—
30
(a)
the individual has sole UK residence for a residence period,
(b)
immediately following that period (referred to as “period A”), one or
more residence periods occur for which the individual does not have
sole UK residence,
(c)
at least 4 out of the 7 tax years immediately preceding the year of
35
departure were either—
(i)
a tax year for which the individual had sole UK residence, or
(ii)
a split year that included a residence period for which the
individual had sole UK residence, and
(d)
the temporary period of non-residence is 5 years or less.
40
      (2)
Terms used in sub-paragraph (1) are defined below.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
534

Residence periods
109
In relation to an individual, a “residence period” is—
(a)
a tax year that, as respects the individual, is not a split year, or
(b)
the overseas part or the UK part of a tax year that, as respects the
individual, is a split year.
5
Sole UK residence
110   (1)
An individual has “sole UK residence” for a residence period consisting of
an entire tax year if—
(a)
the individual is resident in the UK for that year, and
(b)
there is no time in that year when the individual is Treaty non-
10
resident.
      (2)
An individual has “sole UK residence” for a residence period consisting of
part of a split year if—
(a)
the residence period is the UK part of that year, and
(b)
there is no time in that part of the year when the individual is Treaty
15
non-resident.
      (3)
An individual is “Treaty non-resident” at any time if at the time the
individual falls to be regarded as resident in a country outside the UK for the
purposes of double taxation arrangements having effect at the time.
Temporary period of non-residence
20
111
In relation to an individual, “the temporary period of non-residence” is the
period between—
(a)
the end of period A, and
(b)
the start of the next residence period after period A for which the
individual has sole UK residence.
25
Year of departure
112
“The year of departure” is the tax year consisting of or including period A.
Period of return
113
“The period of return” is the first residence period after period A for which
the individual has sole UK residence.
30
Consequential amendments: income tax
114
In ITEPA 2003, for section 576A substitute—
“576A
Temporary non-residents
(1)
This section applies if a person is temporarily non-resident.
(2)
Any relevant withdrawals within subsection (3) are to be treated for
35
the purposes of section 575 as if they arose in the period of return.
(3)
A relevant withdrawal is within this subsection if—
(a)
it is paid to the person in the temporary period of non-
residence, and

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
535

(b)
ignoring this section, it is not chargeable to tax under this Part
(or would not be if a DTR claim were made in respect of it).
(4)
A “relevant withdrawal” is an amount paid under a relevant non-UK
scheme that—
(a)
is paid to the person in respect of a flexible drawdown
5
arrangement relating to the person under the scheme, and
(b)
would, if the scheme were a registered pension scheme, be
“income withdrawal” or “dependants’ income withdrawal”
within the meaning of paragraphs 7 and 21 of Schedule 28 to
FA 2004.
10
(5)
If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies
to the person for the year of return, any relevant withdrawal within
subsection (3) that was remitted to the United Kingdom in the
temporary period of non-residence is to be treated as remitted to the
United Kingdom in the period of return.
15
(6)
This section does not apply to a relevant withdrawal if—
(a)
it is paid to or in respect of a relieved member of the scheme
and is not referable to the member’s UK tax-relieved fund
under the scheme, or
(b)
it is paid to or in respect of a transfer member of the scheme
20
and is not referable to the member’s relevant transfer fund
under the scheme.
(7)
Nothing in any double taxation relief arrangements is to be read as
preventing the person from being chargeable to income tax in respect
of any relevant withdrawal treated by virtue of this section as arising
25
in the period of return (or as preventing a charge to that tax from
arising as a result).
(8)
Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
avoidance) explains—
(a)
when a person is to be regarded as “temporarily non-
30
resident”, and
(b)
what “the temporary period of non-residence” and “the
period of return” mean.
(9)
In this section—
“double taxation relief arrangements” means arrangements that
35
have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“flexible drawdown arrangement” means an arrangement to
which section 165(3A) or 167(2A) of FA 2004 applies;
“remitted to the United Kingdom” has the same meaning as in
40
Chapter A1 of Part 14 of ITA 2007;
“the year of return” means the tax year that consists of or
includes the period of return.
(10)
The following expressions have the meaning given in Schedule 34 to
FA 2004—
45
“relevant non-UK scheme” (see paragraph 1(5));
“relieved member” (see paragraph 1(7));
“transfer member” (see paragraph 1(8));