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

(3) After that subsection insert—

“(5A) Subsections (1A) and (1B) of section 17 apply for the purposes of
subsection (5).”

Special charging rules for property income

79 5In section 270 of ITTOIA 2005 (profits of property businesses: income
charged), after subsection (2) insert—

“(3) If, as respects an individual carrying on an overseas property
business, the tax year is a split year—

(a) tax is charged under this Chapter on so much of the profits
10referred to in subsection (1) as arise in the UK part of the tax
year, and

(b) the portion of the profits arising in the overseas part of the tax
year is, accordingly, not chargeable to tax under this Chapter.

(4) In determining how much of the profits arise in the UK part of the tax
15year—

(a) determine first how much of the non-CAA profits arise in the
UK part by apportioning the non-CAA profits between the
UK part and the overseas part on a just and reasonable basis,
and

(b) 20then adjust the portion of the non-CAA profits arising in the
UK part by deducting any CAA allowances for the year and
adding any CAA charges for the year.

(5) In subsection (4)—

• “CAA allowances” means allowances treated under section 250
  25or 250A of CAA 2001 (capital allowances for overseas
  property businesses) as an expense of the business;

• “CAA charges” means charges treated under either of those
  sections as a receipt of the business;

• “non-CAA profits” means profits before account is taken of any
  30CAA allowances or CAA charges.”

Special charging rules for savings and investment income

80 Part 4 of ITTOIA 2005 (savings and investment income) is amended as
follows.

81 In section 368 (territorial scope of charges in respect of savings and
35investment 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
section as arising to a non-UK resident.”

82 In section 465 (person liable for tax on gains from life insurance etc:
40individuals), after subsection (1) insert—

“(1A) But if the tax year is a split year as respects the individual, the
individual is not liable for tax under this Chapter in respect of gains
arising in the overseas part of that year (subject to section 465B).”

83 In section 467 (person liable: UK resident trustees), in subsection (4), after

paragraph (a) insert—

“(aa) is UK resident but the gain arises in the overseas part of a tax
year that is, as respects the person who created the trusts, a
split year,”.

84 (1) 5Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK
resident policy holders) is amended as follows.

(2) The amendments made by sub-paragraphs (3) to (6) apply to section 528 as
substituted by paragraph 3 of Schedule 8 to this Act, and have effect in
relation to policies and contracts in relation to which that section as so
10substituted has effect.

(3) In subsection (1)(b), for the words from “on which” to the end substitute
“that are foreign days”.

(4) After subsection (1) insert—

“(1A) Foreign days” are—

(a) 15days falling within any tax year for which the individual is
not UK resident, and

(b) days falling within the overseas part of any tax year that is a
split year as respects the individual.”

(5) In subsection (3), in the definition of “A”, for “days falling within subsection
20(1)(b)” substitute “foreign days”.

(6) In subsection (8), for “subsection (1)(b)” substitute “subsection (1A)(a) and
(b)”.

(7) The amendments made by sub-paragraphs (8) to (10) apply to section 528 as
in force immediately before the substitution mentioned in sub-paragraph (2)
25so far as that section as so in force continues to have effect after the
substitution.

(8) In subsection (1), for the words from “the policy holder” to the end substitute
“there are one or more days in the policy period that are foreign days.”

(9) After that subsection insert—

“(1A) 30Foreign days” are—

(a) days on which the policy holder is not UK resident, and

(b) days falling within the overseas part of any tax year that is a
split year as respects the policy holder (if the policy holder is
an individual).”

(10) 35In subsection (3), in the definition of “A”, for the words from “on which” to
the end substitute “in the policy period that are foreign days, and”.

85 (1) Section 528A (reduction in amount charged on basis of non-UK residence of
deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is
amended as follows.

(2) 40In subsection (1)(b), for the words from “on which” to the end substitute
“that were foreign days”.

(3) In subsection (2)—

(a) in paragraph (b), for the words from “on which” to the end substitute
“that were foreign days, and”, and

(b) for paragraph (c), substitute—

“(c) the deceased died—

(i) in a tax year for which the deceased was UK
resident but not one that was a split year as
5respects the deceased, or

(ii) in the UK part of a tax year that was a split
year as respects the deceased.”

(4) After that subsection insert—

“(2A) Foreign days” are—

(a) 10days falling within any tax year for which the deceased was
not UK resident, and

(b) days falling within the overseas part of any tax year that was
a split year as respects the deceased.”

(5) In subsection (4), in the definition of “A”, for the words from “are days
15falling” to the end substitute “were foreign days, and”.

(6) In subsection (8), for “subsection (1)(b) or (2)(b)” substitute “subsection
(2A)(a) and (b)”.

86 (1) Section 536 (top slicing relieved liability: one chargeable event) is amended
as follows.

(2) 20The amendment made by sub-paragraph (3) applies to section 536 as
amended by paragraph 5 of Schedule 8 to this Act, and has effect in
accordance with paragraph 7 of that Schedule.

(3) For subsection (7) substitute—

“(7) If in the case of the individual the gain is reduced under section 528—

(a) 25divide the number of foreign days in the material interest
period (as determined in accordance with that section,
including subsections (7) and (8)) by 365,

(b) if the result is not a whole number, round it down to the
nearest whole number, and

(c) 30reduce N, for steps 1 and 3 in subsection (1), by the number
found by applying paragraphs (a) and (b).”

(4) The amendment made by sub-paragraph (5) applies to section 536 as in force
immediately before it is amended by paragraph 5 of Schedule 8 to this Act,
so far as that section as so in force continues to have effect after it is so
35amended.

(5) For subsection (7) substitute—

“(7) If the gain is from such a policy—

(a) divide the number of foreign days in the policy period (as
defined in section 528) by 365,

(b) 40if the result is not a whole number, round it down to the
nearest whole number, and

(c) reduce N, for steps 1 and 3 in subsection (1), by the number
found by applying paragraphs (a) and (b).”

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
5overseas part of a split year, it is to be treated for the purposes of this
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) 10For any tax year for which the individual is UK resident, income tax
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
15respects the individual.”

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
20applies), after subsection (4) insert—

“(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
25applies), after subsection (4) insert—

“(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
30applies), after subsection (4) insert—

“(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 35TCGA 1992 is amended as follows.

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
40not chargeable to capital gains tax in respect of any chargeable gains
accruing to the individual in the overseas part of that year.

(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
5UK for the year, and

(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) 10in paragraph (a), after “that year of assessment” insert “or that part
(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
15a split year as respects the individual, the UK part of that year”, and

(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) 20Section 12 (non-UK domiciled individuals to whom remittance basis
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
25of the year (the overseas part or the UK part) in which the foreign
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),
30after subsection (3) insert—

“(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) 35the chargeable gain accrues to the company in the overseas
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
40individual in the overseas part of that year.”

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”.

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
5as respects the individual, in the UK part of that year”, and

(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
10year” insert “or a part of the tax year”.

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
15beneficiaries), after subsection (6) insert—

“(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
20the settlement) is a portion of the amount on which the
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.”

25Trustees of a settlement

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
30were not resident in the United Kingdom for that year if—

(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) 35in that year, the only period when the individual is a trustee
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,
40in spite of that, to be regarded as resident whenever the individual
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
45settlement during a tax year,

(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) 5The individual is to be treated for the purposes of subsections (4) and
(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
10individual who is treated under subsection (8) as having been non-
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) 15In subsection (1), insert the following definition in the appropriate place—

• ““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) 20After subsection (1ZA) insert—

“(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
25the following entries in the appropriate places—

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

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

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);”,

• 5““split year”, in relation to 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 FA 2013 (statutory residence test:
  split year treatment);”, and

• ““the UK part”, in relation to a split year, has the meaning given
  10in Part 3 of Schedule 43 to FA 2013 (statutory residence test:
  split year treatment);”.

106 In Schedule 4 to that Act (index of defined expressions), insert the following
entries in the appropriate places—

Part 4 Anti-avoidance

Introduction

107 20This Part of this Schedule—

(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) 25makes consequential amendments to certain enactments containing
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) 30An individual is to be regarded as “temporarily non-resident” if—

(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) 35at least 4 out of the 7 tax years immediately preceding the year of
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) 40the temporary period of non-residence is 5 years or less.

(2) Terms used in sub-paragraph (1) are defined below.

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
5individual, is a split year.

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) 10there is no time in that year when the individual is Treaty non-
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) 15there is no time in that part of the year when the individual is Treaty
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.

20Temporary period of non-residence

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
25individual has sole UK residence.

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
30the individual has sole UK residence.

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) 35Any relevant withdrawals within subsection (3) are to be treated for
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

(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) 5is paid to the person in respect of a flexible drawdown
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
10FA 2004.

(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
15United Kingdom in the period of return.

(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) 20it is paid to or in respect of a transfer member of the scheme
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
25of any relevant withdrawal treated by virtue of this section as arising
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) 30when a person is to be regarded as “temporarily non-
resident”, and

(b) what “the temporary period of non-residence” and “the
period of return” mean.

(9) In this section—

• 35“double taxation relief arrangements” means arrangements that
  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;

• 40“remitted to the United Kingdom” has the same meaning as in
  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
45FA 2004—

• “relevant non-UK scheme” (see paragraph 1(5));

• “relieved member” (see paragraph 1(7));

• “transfer member” (see paragraph 1(8));

Finance (No. 2) BillPage 530

• “member’s UK tax-relieved fund” (see paragraph 3(2));

• “member’s relevant transfer fund” (see paragraph 4(2)).”

115 In ITEPA 2003, for section 579CA substitute—

“579CA Temporary non-residents

(1) 5This section applies if a person is temporarily non-resident.

(2) Any relevant withdrawals within subsection (3) are to be treated for
the purposes of section 579B as if they accrued in the period of
return.

(3) A relevant withdrawal is within this subsection if—

(a) 10it is paid to the person in the temporary period of non-
residence, and

(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 any income withdrawal or dependants’
15income withdrawal paid to the person under a registered pension
scheme in respect of a flexible drawdown arrangement relating to
the person under the scheme.

(5) Nothing in any double taxation relief arrangements is to be read as
preventing the person from being chargeable to income tax in respect
20of any relevant withdrawal treated by virtue of this section as
accruing in the period of return (or as preventing a charge to that tax
from arising as a result).

(6) Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
avoidance) explains—

(a) 25when a person is to be regarded as “temporarily non-
resident”, and

(b) what “the temporary period of non-residence” and “the
period of return” mean.

(7) In this section—

• 30“double taxation relief arrangements” means arrangements that
  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.”

116 35In ITTOIA 2005, for section 832A substitute—

“832A Section 832: temporary non-residents

(1) This section applies if an individual is temporarily non-resident.

(2) Treat any of the individual’s relevant foreign income within
subsection (3) that is remitted to the United Kingdom in the
40temporary period of non-residence as remitted to the United
Kingdom in the period of return.

(3) Relevant foreign income is within this subsection if—

(a) it is relevant foreign income for the UK part of the year of
departure or an earlier tax year, and

(b) section 832 applies to it.

(4) Any apportionment required for the purposes of subsection (3)(a) is
to be done on a just and reasonable basis.

(5) Nothing in any double taxation relief arrangements is to be read as
5preventing the individual from being chargeable to income tax in
respect of any relevant foreign income treated by virtue of this
section as remitted to the United Kingdom in the period of return (or
as preventing a charge to that tax from arising as a result).

(6) Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
10avoidance) explains—

(a) when an individual is to be regarded as “temporarily non-
resident”, and

(b) what “the temporary period of non-residence” and “the
period of return” mean.

(7) 15In this section, “double taxation relief arrangements” means
arrangements that have effect under section 2(1) of TIOPA 2010.”

Consequential amendments: capital gains tax

117 In TCGA 1992, for section 10A substitute—

“10A Temporary non-residents

(1) 20This section applies if an individual (“the taxpayer”) is temporarily
non-resident.

(2) The taxpayer is chargeable to capital gains tax as if gains and losses
within subsection (3) were chargeable gains or, as the case may be,
losses accruing to the taxpayer in the period of return.

(3) 25The gains and losses within this subsection are—

(a) chargeable gains and losses that accrued to the taxpayer in
the temporary period of non-residence,

(b) chargeable gains that would be treated under section 13 as
having accrued to the taxpayer in that period if the residence
30assumption were made,

(c) losses that would be allowable in the taxpayer’s case under
section 13(8) in that period if that assumption were made,
and

(d) chargeable gains that would be treated under section 86 as
35having accrued to the taxpayer in a tax year falling wholly in
that period if the taxpayer had been resident in the United
Kingdom for that year.

(4) The residence assumption is—

(a) that the taxpayer had been resident in the United Kingdom
40for the tax year in which the gain or loss accrued to the
company, or

(b) if that tax year was a split year as respects the taxpayer, that
the gain or loss had accrued to the company in the UK part of
it.

(5) 45But—

(a) a gain is not within subsection (3) if, ignoring this section, the
taxpayer is chargeable to capital gains tax in respect of it (and
could not cease to be so chargeable by making a claim under
section 6 of TIOPA 2010), and

(b) 5a loss is not within subsection (3) if the test in paragraph (a)
would be met if it were a gain.

(6) Subsection (2) is subject to sections 10AA and 86A.

(7) To determine the losses mentioned in subsection (3)(c)—

(a) calculate separately, for each tax year falling wholly or partly
10in the temporary period of non-residence, the portion of sum
A that does not exceed sum B, and

(b) add up all those portions.

(8) For the purposes of subsection (7)—

• “sum A” is the aggregate of the losses that were not available in
  15accordance with section 13(8) for reducing gains accruing to
  the taxpayer by virtue of section 13 in the relevant tax year,
  but would have been available if the residence assumption
  had been made, and

• “sum B” is the amount of the gains that did not accrue to the
  20taxpayer by virtue of section 13 in that tax year but would
  have so accrued if that assumption had been made.

(9) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies
to the taxpayer for the year of return, any foreign chargeable gains
falling within subsection (3) by virtue of paragraph (a) of that
25subsection that were remitted to the United Kingdom at any time in
the temporary period of non-residence are to be treated as remitted
to the United Kingdom in the period of return.

(10) Part 4 of Schedule 43 to the Finance Act 2013 (statutory residence test:
anti-avoidance) explains—

(a) 30when an individual is to be regarded as “temporarily non-
resident”, and

(b) what “the temporary period of non-residence” and “the
period of return” mean.

(11) In this section—

• 35“foreign chargeable gains” has the meaning given by section
  12(4);

• “remitted to the United Kingdom” has the same meaning as in
  Chapter A1 of Part 14 of ITA 2007;

• “the year of return” means the tax year that consists of or
  40includes the period of return.

10AA Section 10A: supplementary

(1) Section 10A(2) does not apply to a gain or loss accruing on the
disposal by the taxpayer of an asset if—

(a) the asset was acquired by the taxpayer in the temporary
45period of non-residence,

(b) it was so acquired otherwise than by means of a relevant
disposal that by virtue of section 58, 73 or 258(4) is treated as

having been a disposal on which neither a gain nor a loss
accrued,

(c) the asset is not an interest created by or arising under a
settlement, and

(d) 5the amount or value of the consideration for the acquisition
of the asset by the taxpayer does not fall, by reference to any
relevant disposal, to be treated as reduced under section
23(4)(b) or (5)(b), 152(1)(b), 153(1)(b), 162(3)(b) or 247(2)(b) or
(3)(b).

(2) 10“Relevant disposal” means a disposal of an asset acquired by the
person making the disposal at a time when that person was resident
in the United Kingdom and was not Treaty non-resident.

(3) Subsection (1) does not apply if—

(a) the gain is one that (ignoring section 10A) would fall to be
15treated by virtue of section 116(10) or (11), 134 or 154(2) or (4)
as accruing on the disposal of the whole or part of another
asset, and

(b) that other asset meets the requirements of paragraphs (a) to
(d) of subsection (1), but the asset in respect of which the gain
20actually accrued or would actually accrue does not.

(4) Nothing in any double taxation relief arrangements is to be read as
preventing the taxpayer from being chargeable to capital gains tax in
respect of any chargeable gains treated under section 10A as
accruing to the taxpayer in the period of return (or as preventing a
25charge to that tax from arising as a result).

(5) Nothing in any enactment imposing any limit on the time within
which an assessment to capital gains tax may be made prevents any
assessment for the year of departure from being made in the
taxpayer’s case at any time before the end of the second anniversary
30of the 31 January next following the year of return (as defined in
section 10A).”

118 For section 86A of TCGA 1992 substitute—

“86A Attribution of gains to settlor in section 10A cases

(1) Subsection (3) applies if—

(a) 35chargeable gains of an amount equal to the amount referred
to in section 86(1)(e) for a tax year (“year A”) are treated
under section 10A as accruing to a settlor under section 86 in
the period of return,

(b) there are amounts on which beneficiaries of the settlement
40are charged to tax under section 87 or 89(2) for one or more
tax years, each of which is earlier than the year of return, and

(c) those amounts are in respect of matched capital payments
received by the beneficiaries.

(2) A “matched” capital payment is a capital payment, all or part of
45which is matched under section 87A with the section 2(2) amount for
year A.

(3) The amount of the chargeable gains mentioned in subsection (1)(a)
for year A that are treated under section 10A as accruing to the settlor

under section 86 in the period of return is to be reduced by the
appropriate amount.

(4) The appropriate amount is—

(a) the sum of the amounts mentioned in subsection (1)(c) to the
5extent that the matched capital payments are matched under
section 87A with the section 2(2) amount for year A, or

(b) if the property comprised in the settlement has at any time
included property not originating from the settlor, so much
(if any) of that sum as, on a just and reasonable
10apportionment, is properly referable to the settlor.

(5) If a reduction falls to be made under subsection (3) for the year of
return, the deduction to be made in accordance with section 87(4)(b)
for the settlement for that year must not be made until—

(a) all the reductions to be made under subsection (3) for that
15year for each settlor have been made, and

(b) those reductions are to be made starting with the year
immediately preceding the year of return and working
backwards.

(6) Subsection (7) applies if, with respect to year A, an amount remains
20to be treated under section 10A as accruing to any of the settlors in
the period of return after having made the reductions under
subsection (3) with respect to year A.

(7) The aggregate of the amounts remaining to be so treated (for all of
the settlors) is to be applied in reducing so much of the section 2(2)
25amount for year A as has not already been matched with a capital
payment under section 87A for any year prior to the year of return
(but not so as to reduce the section 2(2) amount below zero).

(8) In this section—

(a) “the settlement” means the settlement in relation to which the
30settlor mentioned in subsection (1)(a) is a settlor,

(b) a reference to “the settlors” or “each settlor” is to the settlors
or each settlor in relation to the settlement,

(c) “period of return” and “year of return” have the same
meanings as in section 10A, and

(d) 35paragraph 8 of Schedule 5 applies in construing the reference
to property originating from the settlor.”

119 In section 96 (payment by and to companies), in subsection (9A), for the
words from “which in his case” to the end substitute “for which he or she
was not so resident if—

“(a) 40section 10A applies to him or her, and

(b) the year falls within the temporary period of non-residence.”

120 (1) Section 279B (deferred unascertainable consideration: supplementary
provisions) is amended as follows.

(2) In subsection (7), for “year of return” substitute “period of return”.

(3) 45In subsection (8)(a) and (b), for “year” substitute “period”.

121 (1) Schedule 4C (transfers of value: attribution of gains to beneficiaries) is
amended as follows.

(2) In paragraph 6(1)(b), for “year of return” substitute “period of return”.

(3) In paragraph 12(1)—

(a) for paragraph (a) substitute—

“(a) by virtue of section 10A, an amount of chargeable
5gains within section 86(1)(e) that accrued in a tax
year (“year A”) to the trustees of a settlement
would be treated as accruing to a person (“the
settlor”) in the period of return, and”, and

(b) in paragraph (b), for “the intervening year” substitute “year A”.

(4) 10In paragraph 12(2), for “year of return” substitute “period of return”.

(5) In paragraph 12A(1)—

(a) for “year of return” substitute “period of return”, and

(b) for “an intervening year” substitute “the temporary period of non-
residence”.

15New special rule: lump sum payments under pension schemes etc

122 ITEPA 2003 is amended as follows.

123 In Chapter 2 of Part 6 (employer-financed retirement benefits), after section
394 insert—

“394A Temporary non-residents

(1) 20This section applies if an individual is temporarily non-resident.

(2) Any benefits within subsection (3) are to be treated for the purposes
of section 394(1) as if they were received by the individual in the
period of return.

(3) A benefit is within this subsection if—

(a) 25this Chapter applies to it,

(b) it is in the form of a lump sum,

(c) it is received by the individual in the temporary period of
non-residence, and

(d) ignoring this section—

(i) 30no charge to tax arises by virtue of section 394(1) in
respect of it, but

(ii) such a charge would arise if the existence of any
double taxation relief arrangements were
disregarded.

(4) 35Subsection (3)(d)(i) includes a case where the charge could be
prevented by making a DTR claim, even if no claim is in fact made.

(5) Subsection (2) does not affect the operation of section 394(1A) (and,
accordingly, “the relevant tax year” for the purposes of section
394(1A) remains the tax year in which the benefit is actually
40received).

(6) Nothing in any double taxation relief arrangements is to be read as
preventing the individual from being chargeable to income tax in
respect of any benefit treated by virtue of this section as received in

the period of return (or as preventing a charge to that tax from
arising as a result).