Finance (No. 2) Bill (HC Bill 154)

Case 7

50 (1) The circumstances of a case fall within Case 7 if they are as described in sub-
paragraphs (2) to (6).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) 5The taxpayer has a partner whose circumstances fall within Case 6 for—

(a) the relevant year, or

(b) the previous tax year.

(4) On a day in the relevant year, the taxpayer moves to the UK so the taxpayer
and the partner can continue to live together on the partner’s return or
10relocation to the UK.

(5) In the part of the relevant year before the deemed arrival day—

(a) the taxpayer has no home in the UK at any time, or has homes in both
the UK and overseas but spends the greater part of the time living in
the overseas home, and

(b) 15the number of days that the taxpayer spends in the UK does not
exceed the permitted limit.

(6) The taxpayer is resident in the UK for the next tax year (whether or not it is
a split year).

(7) If sub-paragraph (3)(a) applies, the “deemed arrival day” is the later of—

(a) 20the day mentioned in sub-paragraph (4), and

(b) the first day of what is, for the partner, the UK part of the relevant
year as defined for Case 6 (see paragraph 54).

(8) If sub-paragraph (3)(b) applies, the “deemed arrival day” is the day
mentioned in sub-paragraph (4).

(9) 25The permitted limit is the number found by reducing 90 by the appropriate
number.

(10) The appropriate number is the result of—

Case 8

51 (1) The circumstances of a case fall within Case 8 if they are as described in sub-
35paragraphs (2) to (5).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) At the start of the relevant year, the taxpayer had no home in the UK but—

(a) there comes a day when, for the first time in that year, the taxpayer
does have a home in the UK, and

(b) 40from then on, the taxpayer continues to have a home in the UK for
the rest of that year and for the whole of the next tax year.

(4) For the part of the relevant year before the day mentioned in sub-paragraph
(3)(a), the taxpayer does not have sufficient UK ties.

(5) The taxpayer is resident in the UK for the next tax year and that tax year is
not a split year as respects the taxpayer.

(6) 5Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those
paragraphs) apply for the purposes of sub-paragraph (4) with the following
adjustments—

(a) references in those paragraphs and that Part to year X are to be read
as references to the part of the relevant year mentioned in sub-
10paragraph (4), and

(b) each number of days mentioned in the first column of the Table in
paragraphs 18 and 19 is to be reduced by the appropriate number.

(7) The appropriate number is found by multiplying the number of days, in
each case, by—

15

(8) Sub-paragraph (6)(a) does not apply to the references to year X in
paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence
20status of family members) so those references must continue to be read as
references to year X.

General rules for construing Cases 1 to 8

52 (1) This paragraph applies for the purposes of paragraphs 44 to 51.

(2) A reference to “the previous tax year” is to the tax year preceding the
25relevant year.

(3) A reference to “the next tax year” is to the tax year following the relevant
year.

(4) “Partner”, in relation to the taxpayer, means—

(a) a husband or wife or civil partner,

(b) 30if the taxpayer and another person are living together as husband
and wife, that other person, or

(c) if the taxpayer and another person of the same sex are living together
as if they were civil partners, that other person.

(5) If calculation of the appropriate number results in a number of days that is
35not a whole number, the appropriate number is to be rounded up or down
as follows—

(a) if the first figure after the decimal point is 5 or more, round the
appropriate number up to the nearest whole number,

(b) otherwise, round it down to the nearest whole number.

40The overseas part

53 (1) “The overseas part” of a split year is—

(a) the part of that year defined below for the Case in question, or

(b) if the taxpayer’s circumstances fall within more than one Case, the
shortest of the parts so defined for those Cases.

(2) For Case 1, the overseas part is—

(a) if there is only one period falling within paragraph 44(3), the part
5beginning with the first day of that period, and

(b) if there is more than one such period, the part beginning with the first
day of the longest of those periods.

(3) For Case 2, the overseas part is the part beginning with the deemed
departure day as defined in paragraph 45(7) and (8).

(4) 10For Case 3, the overseas part is the part beginning with the day mentioned
in paragraph 46(3)(a).

(5) For Case 4, the overseas part is the part before the day mentioned in
paragraph 47(3).

(6) For Case 5, the overseas part is—

(a) 15if there is only one period falling within paragraph 48(3), the part
before that period begins, and

(b) if there is more than one such period, the part before the first of those
periods begins.

(7) For Case 6, the overseas part is—

(a) 20if there is only one period falling within paragraph 49(3), the part
ending with the last day of that period, and

(b) if there is more than one such period, the part ending with the last
day of the longest of those periods.

(8) For Case 7, the overseas part is the part before the deemed arrival day as
25defined in paragraph 50(7) and (8).

(9) For Case 8, the overseas part is the part before the day mentioned in
paragraph 51(3)(a).

The UK part

54 “The UK part” of a split year is the part of that year that is not the overseas
30part.

Special charging rules for employment income

55 ITEPA 2003 is amended as follows.

56 (1) In section 15 (earnings for year when employee UK resident), for subsection
(1) substitute—

“(1) 35This section applies to general earnings for a tax year for which the
employee is UK resident except that, in the case of a split year, it does
not apply to any part of those earnings that is excluded.

(1A) General earnings are “excluded” if they—

(a) are attributable to the overseas part of the split year, and

(b) 40are neither—

(i) general earnings in respect of duties performed in the
United Kingdom, nor

(ii) general earnings from overseas Crown employment
subject to United Kingdom tax.”

(2) After subsection (3) insert—

“(4) Any attribution required for the purposes of subsection (1A)(a) is to
5be done on a just and reasonable basis.

(5) The following provisions of Chapter 5 of this Part apply for the
purposes of subsection (1A)(b) as for the purposes of section 27(2)—

(a) section 28 (which defines “general earnings from overseas
Crown employment subject to United Kingdom tax”), and

(b) 10sections 38 to 41 (which contain rules for determining the
place of performance of duties of employment).

(6) Subject to any provision made in an order under section 28(5) for the
purposes of subsection (1A)(b), provisions made in an order under
that section for the purposes of section 27(2) apply for the purposes
15of subsection (1A)(b) too.”

57 In section 22 (chargeable overseas earnings for year when remittance basis
applies and employee outside section 26), for subsection (7) substitute—

“(7) Section 15(1) does not apply to general earnings within subsection
(1).”

58 (1) 20Section 23 (calculation of “chargeable overseas earnings”) is amended as
follows.

(2) In subsection (3), for step 1 substitute—

• “Step 1

• Identify—

  (a)

  25in the case of a tax year that is not a split year, the full
  amount of the overseas earnings for that year, and

  (b)

  in the case of a split year, so much of the full amount
  of the overseas earnings for that year as is attributable
  to the UK part of the year.”

(3) 30In that subsection, in step 2, for “those earnings” substitute “the earnings
identified under step 1”.

(4) After that subsection insert—

“(4) Any attribution required for the purposes of step 1 or step 2 in
subsection (3) is to be done on a just and reasonable basis.”

59 (1) 35Section 24 (limit on chargeable overseas earnings where duties of associated
employment performed in UK) is amended as follows.

(2) After subsection (2) insert—

“(2A) If the tax year is a split year as respects the employee, subsection (2)
has effect as if for “the aggregate earnings for that year from all the
40employments concerned” there were substituted “so much of the
aggregate earnings for that year from all the employments concerned
as is attributable to the UK part of that year”.”

(3) After subsection (3) insert—

“(3A) Any attribution required for the purposes of subsection (2A) is to be
done on a just and reasonable basis.”

60 (1) Section 26 (foreign earnings for year when remittance basis applies and
5employee meets section 26A requirement) is amended as follows.

(2) In subsection (1), for the words from “if the general earnings” to the end
substitute “if the general earnings meet all of the following conditions—

(a) they are neither—

(i) general earnings in respect of duties performed in the
10United Kingdom, nor

(ii) general earnings from overseas Crown employment
subject to United Kingdom tax, and

(b) if the tax year is a split year as respects the employee, they are
attributable to the UK part of the year.”

(3) 15After subsection (5) insert—

“(5A) Any attribution required for the purposes of subsection (1)(b) is to be
done on a just and reasonable basis.”

(4) For subsection (6) substitute—

“(6) Section 15(1) does not apply to general earnings within subsection
20(1).”

61 In section 232 (giving effect to mileage allowance relief), after subsection (6)
insert—

“(6A) If the earnings from which a deduction allowed under this section is
deductible include earnings that are “excluded” within the meaning
25of section 15(1A)—

(a) the amount of the deduction allowed is a proportion of the
amount that would be allowed under this section if the tax
year were not a split year, and

(b) that proportion is equal to the proportion that the part of the
30earnings that is not “excluded” bears to the total earnings.”

62 (1) Section 329 (deduction from earnings not to exceed earnings) is amended as
follows.

(2) After subsection (1) insert—

“(1A) If the earnings from which a deduction allowed under this Part is
35deductible include earnings that are “excluded” within the meaning
of section 15(1A)—

(a) the amount of the deduction allowed is a proportion of the
amount that would be allowed under this Part if the tax year
were not a split year, and

(b) 40that proportion is equal to the proportion that the part of the
earnings that is not “excluded” bears to the total earnings.”

(3) In subsection (2), after “those earnings” insert “(or, in a case within
subsection (1A), the part of those earnings that is not “excluded”)”.

(4) In subsection (3), after “the earnings” insert “(or, in a case within subsection
(1A), the part of the earnings that is not “excluded”)”.

63 (1) Section 394 (charge on employer-financed retirement benefits) is amended
as follows.

(2) 5In subsection (4C), omit “or” at the end of paragraph (b) and after that
paragraph insert—

“(ba) an amount which would count as employment income of the
employee or former employee under that Chapter but for the
application of section 554Z5 (overlap with earlier relevant
10step), or”.

(3) In that subsection, for paragraph (c) substitute—

“(c) an amount which would be within paragraph (a), (b) or (ba)
apart from—

(i) the employee or former employee having been non-
15UK resident for any tax year, or

(ii) any tax year having been a split year as respects the
employee or former employee.”

64 (1) Section 421E (income relating to securities: exclusions about residence etc) is
amended as follows.

(2) 20For subsection (1) substitute—

“(1) Chapters 2, 3 and 4 do not apply in relation to employment-related
securities if the acquisition occurs in a tax year that is not a split year
as respects the employee and—

(a) the earnings from the employment for that tax year are not
25general earnings to which section 15, 22 or 26 applies
(earnings for year when employee UK resident), or

(b) had there been any earnings from the employment for that
tax year, they would not have been general earnings to which
any of those sections applied.

(1A) 30Chapters 2, 3 and 4 do not apply in relation to employment-related
securities if the acquisition occurs in the UK part of a tax year that is
a split year as respects the employee and—

(a) the earnings from the employment attributable to that part of
the year are not general earnings to which section 15, 22 or 26
35applies, or

(b) had there been any earnings from the employment
attributable to that part of the year, they would not have been
general earnings to which any of those sections applied.

(1B) Chapters 2, 3 and 4 do not apply in relation to employment-related
40securities if the acquisition occurs in the overseas part of a tax year
that is a split year as respects the employee.”

(3) After subsection (2) insert—

“(2A) But Chapters 3A to 3D do apply in relation to employment-related
securities in relation to which they are disapplied by subsection (2)
45if—

(a) the acquisition takes place in the overseas part of a tax year
that is a split year as respects the employee,

(b) the tax year is a split year because the circumstances of the
case fall within Case 1, Case 2 or Case 3 as described in Part 3
of Schedule 43 to FA 2013 (split year treatment: cases
involving actual or deemed departure from the United
5Kingdom), and

(c) had it not been a split year—

(i) the earnings from the employment for that tax year
(or some of them) would have been general earnings
to which section 15, 22 or 26 applied, or

(ii) 10if there had been any earnings from the employment
for that tax year, they (or some of them) would have
been general earnings to which any of those sections
applied.”

65 In section 474 (cases where Chapter 5 of Part 7 does not apply), for
15subsection (1) substitute—

“(1) This Chapter (apart from sections 473 and 483) does not apply in
relation to an employment-related securities option if the acquisition
occurs in a tax year that is not a split year as respects the employee
and—

(a) 20the earnings from the employment are not general earnings
to which section 15, 22 or 26 applies (earnings for year when
employee UK resident), or

(b) had there been any earnings from the employment, they
would not have been general earnings to which any of those
25sections applied.

(1A) This Chapter (apart from sections 473 and 483) does not apply in
relation to an employment-related securities option if the acquisition
occurs in the UK part of a tax year that is a split year as respects the
employee and—

(a) 30the earnings from the employment attributable to that part of
the year are not general earnings to which section 15, 22 or 26
applies (earnings for year when employee UK resident), or

(b) had there been any earnings from the employment
attributable to that part of the year, they would not have been
35general earnings to which any of those sections applied.

(1B) This Chapter (apart from sections 473 and 483) does not apply in
relation to an employment-related securities option if the acquisition
occurs in the overseas part of a tax year that is a split year as respects
the employee.”

66 (1) 40Section 554Z4 (residence issues) is amended as follows.

(2) For subsections (3) to (5) substitute—

“(3) Subsection (4) applies if the value of the relevant step, or a part of it,
is “for”—

(a) a tax year for which A is non-UK resident, or

(b) 45a tax year that is a split year as respects A.

(4) The value, or the part of it, is to be reduced—

(a) in a case within subsection (3)(a), by so much of the value, or
the part of it, as is not in respect of UK duties, and

(b) in a case within subsection (3)(b), by so much of the value, or
the part of it, as is both—

(i) attributable to the overseas part of the tax year, and

(ii) not in respect of UK duties.

(5) 5The extent to which—

(a) the value, or the part of it, is not in respect of UK duties, or

(b) so much of the value, or the part of it, as is attributable to the
overseas part of the tax year is not in respect of UK duties,

is to be determined on a just and reasonable basis.”

(3) 10After subsection (5) insert—

“(5A) Any attribution required for the purposes of subsection (4)(b)(i) is to
be done on a just and reasonable basis.

(5B) “UK duties” means duties performed in the United Kingdom.”

67 In section 554Z6 (overlap with certain earnings), in subsection (1)(a), after
15“UK resident” insert “(and, in the case of a tax year that is a split year as
respects A, are not “excluded” by virtue of section 15(1A)(a) and (b)(i))”.

68 In section 554Z9 (remittance basis: A is ordinarily UK resident), in
subsection (5)—

(a) in paragraph (b), after “that income” insert “(or of so much of it as is
20attributable to the UK part of the relevant tax year, if it was a split
year as respects A)”, and

(b) in paragraph (c), after “tax year” insert “(or the UK part of it)”.

69 (1) Section 554Z10 (remittance basis: A is not ordinarily resident) is amended as
follows.

(2) 25In subsection (1), for paragraph (a) substitute—

“(a) the value of the relevant step, or a part of it, is “for” a tax year
(“the relevant tax year”) as determined under section
554Z4,”.

(3) For subsection (2) substitute—

“(2) 30The overseas portion of (as the case may be)—

(a) A’s employment income by virtue of section 554Z2(1), or

(b) the relevant part of A’s employment income by virtue of that
section,

is “taxable specific income” in a tax year so far as the overseas portion
35is remitted to the United Kingdom in that year.”

(4) After that subsection insert—

“(2A) The overseas portion” of A’s employment income by virtue of
section 554Z2(1), or of the relevant part of that income, is so much of
that income, or of the relevant part of it, as is not in respect of UK
40duties.

(2B) “UK duties” means duties performed in the United Kingdom.”

(5) In subsection (3), for “this purpose” substitute “the purposes of this section”.

(6) For subsection (4) substitute—

“(4) The extent to which—

(a) the employment income, or the relevant part of it, is not in
respect of UK duties, or

(b) 5so much of the employment income, or of the relevant part of
it, as is attributable to the UK part of the relevant tax year is
not in respect of UK duties,

is to be determined on a just and reasonable basis.”

Special charging rules for pension income

70 (1) 10Section 575 of ITEPA 2003 (foreign pensions: taxable pension income) is
amended as follows.

(2) In subsection (1), after “subsections” insert “(1A),”.

(3) After that subsection insert—

“(1A) If the person liable for the tax under this Part is an individual and the
15tax year is a split year as respects that individual, the taxable pension
income for the tax year is the full amount of the pension income
arising in the UK part of the year, subject to subsections (2) and (3)
and section 576A.”

(4) In subsection (2), after “tax year” insert “or, as the case may be, the UK part
20of the tax year”.

PAYE income

71 (1) Section 690 of ITEPA 2003 (employee non-residents etc) is amended as
follows.

(2) In subsection (1), omit “only”.

(3) 25After that subsection insert—

“(1A) This section also applies in relation to an employee in a tax year if it
appears to an officer of Revenue and Customs that—

(a) the tax year is likely to be a split year as respects the
employee, and

(b) 30the employee works or will work in the United Kingdom and
also works or is likely to work outside the United Kingdom.”

Special charging rules for trading income

72 ITTOIA 2005 is amended as follows.

73 In section 6 (territorial scope of charge to tax), after subsection (2) insert—

“(2A) 35If the tax year is a split year as respects a UK resident individual, this
section has effect as if, for the overseas part of that year, the
individual were non-UK resident.”

74 (1) Section 17 (effect of becoming or ceasing to be UK resident) is amended as
follows.

(2) For subsection (1) substitute—

“(1) This section applies if—

(a) an individual carries on a trade otherwise than in
partnership, and

(b) 5there is a change of residence.

(1A) For the purposes of this section there is a “change of residence” if—

(a) the individual becomes or ceases to be UK resident, or

(b) a tax year is, as respects the individual, a split year.

(1B) The change of residence occurs—

(a) 10in a case falling within subsection (1A)(a), at the start of the
tax year for which the individual becomes or ceases to be UK
resident, and

(b) in a case falling within subsection (1A)(b), at the start of
whichever of the UK part or the overseas part of the tax year
15is the later part.”

(3) In subsection (2), at the beginning insert “If this section applies and the
individual does not actually cease permanently to carry on the trade
immediately before the change of residence occurs,”.

75 In section 243 (post-cessation receipts: extent of charge to tax), after
20subsection (5) insert—

“(6) If the tax year is a split year as respects a UK resident individual, this
section has effect as if, for the overseas part of that year, the
individual were non-UK resident.”

76 In section 849 (calculation of firm’s profits or losses), after subsection (3)
25insert—

“(3A) For any tax year that is a split year as respects the partner, this section
has effect as if the partner were non-UK resident in the overseas part
of the year.”

77 (1) Section 852 (carrying on by partner of notional trade) is amended as follows.

(2) 30For subsection (6) substitute—

“(6) If there is a change of residence, the partner is treated as permanently
ceasing to carry on one notional trade when that change of residence
occurs and starting to carry on another immediately afterwards.”

(3) After subsection (7) insert—

“(8) 35Subsections (1A) and (1B) of section 17 apply for the purposes of
subsection (6).”

78 (1) Section 854 (carrying on by partner of notional business) is amended as
follows.

(2) For subsection (5) substitute—

“(5) 40If there is a change of residence, the partner is treated as permanently
ceasing to carry on one notional business when that change of
residence occurs and starting to carry on another immediately
afterwards.”