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

in respect of certain distributions), after section 401B insert—

“Anti-avoidance

401C Temporary non-residents

(1) This section applies if—

(a) 5an individual is temporarily non-resident,

(b) a relevant distribution is made or treated as made to the
individual in the temporary period of non-residence,

(c) the tax year in which it is made or treated as made (“the
distribution year”) is a tax year for which the individual is UK
10resident, and

(d) the amount of income tax charged on the distribution under
this Chapter is less than it would have been if the existence of
double taxation relief arrangements were disregarded.

(2) Subsections (3) and (4) have effect in cases where the distribution
15year is not the year of return.

(3) The total income (see Step 1 of the calculation in section 23 of ITA
2007) on which the individual is charged to income tax for the year
of return is to be increased by an amount equal to the amount on
which tax would be charged under this Chapter in respect of the
20distribution disregarding any double taxation relief arrangements.

(4) But the notional UK tax on that distribution is to be allowed as a
credit against the individual’s liability to income tax for the year of
return under Step 6 of the calculation in section 23.

(5) If the distribution year is the year of return, the tax charged under
25this Chapter in respect of the relevant distribution is to be charged
and assessed without regard to the existence of double taxation relief
arrangements.

(6) For the purposes of this section, a dividend or other distribution is a
“relevant distribution” if—

(a) 30it is a dividend or other distribution of a close company, and

(b) it is made or treated as made to the individual because the
individual was at a relevant time—

(i) a material participator in the company, or

(ii) an associate of a material participator in the company.

(7) 35But a dividend or other distribution within subsection (6) in the form
of a cash dividend is not a “relevant distribution” to the extent that
the dividend is paid in respect of post-departure trade profits.

(8) “Post-departure trade profits” are—

(a) trade profits of the close company arising in an accounting
40period that begins after the start of the temporary period of
non-residence, and

(b) so much of any trade profits of the close company arising in
an accounting period that straddles the start of that
temporary period as is attributable (on a just and reasonable
45basis) to a time after the start of that temporary period.

(9) The extent to which a dividend is paid in respect of post-departure
trade profits is to be determined on a just and reasonable basis.

(10) The “notional UK tax” on the relevant distribution is so much of the
income tax paid by the individual for the distribution year as is
5attributable on a just and reasonable basis to the relevant
distribution.

(11) If section 393 applies, references in this section to a distribution being
made to the individual are to a cash dividend being paid over to the
individual.

(12) 10In this section—

• “associate” and “participator” have the same meanings as in
  Part 10 of CTA 2010 (see sections 448 and 454);

• “material participator” means a participator who has a material
  interest in the company, as defined in section 457 of that Act;

• 15“relevant time” means—

  (a)

  any time in the year of departure or, if the year of
  departure is a split year as respects the individual, the
  UK part of that year, or

  (b)

  any time in one or more of the 3 tax years preceding
  20that year;

• “trade profits of the close company” means the profits of any
  trade carried on by the close company, as calculated in
  accordance with Part 3 of CTA 2009 (trading income).”

132 In Chapter 4 (dividends from non-UK resident companies), after section 408
25insert—

“Anti-avoidance

408A Temporary non-residents

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

(2) Dividends within subsection (3) are to be treated for the purposes of
30this Chapter as if they were received by the individual, or as if the
individual became entitled to them, in the period of return.

(3) A dividend is within this subsection if—

(a) the individual receives or becomes entitled to it in the
temporary period of non-residence,

(b) 35it is a dividend of a company that would be a close company
if the company were UK resident,

(c) the individual receives or becomes entitled to it by virtue of
being at a relevant time—

(i) a material participator in the company, or

(ii) 40an associate of a material participator in the company,
and

(d) ignoring this section, the individual—

(i) is not liable for tax under this Chapter in respect of the
dividend, but

(ii) would have been so liable if the individual had
received the dividend, or become entitled to it, in the
period of return.

(4) For the purposes of subsection (3)—

(a) 5“associate” and “participator” have the same meanings as in
Part 10 of CTA 2010 (see sections 448 and 454),

(b) a “material participator” is a participator who has a material
interest in the company, as defined in section 457 of that Act,

(c) “relevant time” means—

(i) 10any time in the year of departure or, if the year of
departure is a split year as respects the individual, the
UK part of that year, or

(ii) any time in one or more of the 3 tax years preceding
that year, and

(d) 15paragraph (d)(i) includes a case where the individual could
be relieved of liability on the making of a claim under section
6 of TIOPA 2010 (double taxation relief), even if no claim is in
fact made.

(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies
20to the individual for the year of return, any dividend 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.

(6) This section does not apply to a dividend within subsection (3) to the
25extent that it is paid in respect of post-departure trade profits.

(7) “Post-departure trade profits” are—

(a) trade profits of the company arising in an accounting period
that begins after the start of the temporary period of non-
residence, and

(b) 30so much of any trade profits of the company arising in an
accounting period that straddles the start of that temporary
period as is attributable (on a just and reasonable basis) to a
time after the start of that temporary period.

(8) The extent to which a dividend is paid in respect of post-departure
35trade profits is to be determined on a just and reasonable basis.

(9) If section 406 or 407 applies, references in this section to a dividend
being received by the individual are to a cash dividend being paid
over to the individual or (as the case may be) a dividend being
treated as paid to the individual.

(10) 40In this section—

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

• “trade profits of the company” means the profits of any trade
  carried on by the company, as they would be calculated in
  45accordance with Part 3 of CTA 2009 (trading income) if the
  company were UK resident.”

133 In Chapter 5 (stock dividends from UK resident companies), after section

413 insert—

“413A Temporary non-residents

(1) This section applies if—

(a) an individual is temporarily non-resident,

(b) 5relevant stock dividend income is treated under this Chapter
as arising to the individual in the temporary period of non-
residence,

(c) the tax year in which it is treated as arising (“the arising
year”) is a tax year for which the individual is UK resident,
10and

(d) the amount of income tax charged on the relevant stock
dividend income under this Chapter is less than it would
have been if the existence of double taxation relief
arrangements were disregarded.

(2) 15Subsections (3) and (4) have effect in cases where the arising year is
not the year of return.

(3) The total income (see Step 1 of the calculation in section 23 of ITA
2007) on which the individual is charged to income tax for the year
of return is to be increased by an amount equal to the amount on
20which tax would be charged under this Chapter in respect of the
relevant stock dividend income disregarding any double taxation
relief arrangements.

(4) But the notional UK tax on that relevant stock dividend income is to
be allowed as a credit against the individual’s liability to income tax
25for the year of return under Step 6 of the calculation in section 23.

(5) If the arising year is the year of return, the tax charged under this
Chapter in respect of the relevant stock dividend income is to be
charged and assessed without regard to the existence of double
taxation relief arrangements.

(6) 30Stock dividend income is “relevant stock dividend income” if—

(a) the UK resident company that issues the share capital or
bonus share capital is a close company, and

(b) the individual is beneficially entitled to that share capital or
bonus share capital by virtue of being at a relevant time—

(i) 35a material participator in the company, or

(ii) an associate of a material participator in the company.

(7) But stock dividend income within subsection (6) is not “relevant
stock dividend income” to the extent that the share capital or bonus
share capital is issued in respect of post-departure trade profits.

(8) 40“Post-departure trade profits” are—

(a) trade profits of the close company arising in an accounting
period that begins after the start of the temporary period of
non-residence, and

(b) so much of any trade profits of the close company arising in
45an accounting period that straddles the start of that
temporary period as is attributable (on a just and reasonable
basis) to a time after the start of that temporary period.

(9) The extent to which share capital or bonus share capital is issued in
respect of post-departure trade profits is to be determined on a just
and reasonable basis.

(10) The “notional UK tax” on the relevant stock dividend income is so
5much of the income tax paid by the individual for the arising year as
is attributable on a just and reasonable basis to that income.

(11) In this section—

• “associate” and “participator” have the same meanings as in
  Part 10 of CTA 2010 (see sections 448 and 454);

• 10“material participator” means a participator who has a material
  interest in the company, as defined in section 457 of that Act;

• “relevant time” means—

  (a)

  any time in the year of departure or, if the year of
  departure is a split year as respects the individual, the
  15UK part of that year, or

  (b)

  any time in one or more of the 3 tax years preceding
  that year;

• “trade profits of the close company” means the profits of any
  trade carried on by the close company, as calculated in
  20accordance with Part 3 of CTA 2009 (trading income).”

134 In Chapter 6 (release of loan to participator in close company), after section
420 insert—

“420A Temporary non-residents

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

(2) 25Debts within subsection (3) are to be treated for the purposes of this
Chapter as if they had been released or written off in the period of
return.

(3) A debt is within this subsection if—

(a) it is the debt, or a part of the debt, in respect of a loan or
30advance made by a company to the individual,

(b) it is released or written off in the temporary period of non-
residence, and

(c) ignoring this section, the individual—

(i) is not liable for tax under this Chapter in respect of the
35release or write-off, but

(ii) would have been so liable, had the release or write-off
taken place in the period of return.

(4) Subsection (3)(c)(i) includes a case where the individual could be
relieved of liability on the making of a claim under section 6 of
40TIOPA 2010 (double taxation relief), even if no claim is in fact made.”

135 In Chapter 8 of Part 5 of that Act (income not otherwise charged), after
section 689 insert—

“689A Temporary non-residents

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

(2) Distributions within subsection (3) are to be treated for the purposes
of this Chapter as if they had been received by the individual, or as
if the individual had become entitled to them, in the period of return.

(3) A distribution is within this subsection if—

(a) 5the individual receives or becomes entitled to it in the
temporary period of non-residence,

(b) it is a distribution of a company that is a close company or
that would be a close company if the company were UK
resident,

(c) 10the individual receives or becomes entitled to the distribution
by virtue of being at a relevant time—

(i) a material participator in the company, or

(ii) an associate of a material participator in the company,
and

(d) 15ignoring this section, the individual—

(i) is not liable for tax under this Chapter in respect of the
distribution, but

(ii) would have been so liable if the individual had
received the distribution, or become entitled to it, in
20the period of return.

(4) For the purposes of subsection (3)—

(a) “associate” and “participator” have the same meanings as in
Part 10 of CTA 2010 (see sections 448 and 454),

(b) a “material participator” is a participator who has a material
25interest in the company, as defined in section 457 of that Act,

(c) “relevant time” means—

(i) any time in the year of departure or, if the year of
departure is a split year as respects the individual, the
UK part of that year, or

(ii) 30any time in one or more of the 3 tax years preceding
that year, and

(d) paragraph (d)(i) includes a case where the individual could
be relieved of liability on the making of a claim under section
6 of TIOPA 2010 (double taxation relief), even if no claim is in
35fact made.

(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies
to the individual for the year of return, any distribution within
subsection (3) that is relevant foreign income and is remitted to the
United Kingdom in the temporary period of non-residence is to be
40treated as remitted to the United Kingdom in the period of return.

(6) In this section, “remitted to the United Kingdom” has the meaning
given in Chapter A1 of Part 14 of ITA 2007.”

136 In Chapter 1 of Part 14 of ITA 2007 (limits on liability to income tax of non-
UK residents), after section 812 insert—

“812A 45Temporary non-residents

(1) This section applies if—

(a) an individual is temporarily non-resident,

(b) the individual’s liability to income tax for a tax year is limited
under section 811,

(c) that tax year (“the non-resident year”) falls within the
temporary period of non-residence, and

(d) 5the individual’s income for that tax year includes relevant
investment income.

(2) The total income (see Step 1 of the calculation in section 23) on which
the individual is charged to income tax for the year of return is to be
increased by an amount equal to the amount of that relevant
10investment income.

(3) But the notional UK tax on that relevant investment income is to be
allowed as a credit against the individual’s liability to income tax for
the year of return under Step 6 of the calculation in section 23.

(4) Income is “relevant investment income” if—

(a) 15it is chargeable under Chapter 3 or 5 of Part 4 of ITTOIA 2005
(dividends etc from UK resident companies and stock
dividends from UK resident companies),

(b) the distributing company is a close company, and

(c) the income arises or is treated as arising to the individual
20because the individual was at a relevant time—

(i) a material participator in that company, or

(ii) an associate of a material participator in the company.

(5) But income within subsection (4) in the form of a cash or stock
dividend is not “relevant investment income” to the extent that the
25dividend is paid, or the share capital is issued, in respect of post-
departure trade profits.

(6) “Post-departure trade profits” are—

(a) trade profits of the distributing company arising in an
accounting period that begins after the start of the temporary
30period of non-residence, and

(b) so much of any trade profits of the distributing company
arising in an accounting period that straddles the start of that
temporary period as is attributable (on a just and reasonable
basis) to a time after the start of that temporary period.

(7) 35The “notional UK tax” on relevant investment income is—

(a) the total of any sums in respect of that income that were
included within amount A in determining the limit under
section 811, less

(b) any credit for foreign tax paid in respect of that income that
40was allowed under Chapter 2 of Part 2 of TIOPA 2010 against
the individual’s liability to income tax for the non-resident
year.

(8) The following matters are to be determined on a just and reasonable
basis—

(a) 45the extent to which a dividend is paid, or share capital is
issued, in respect of post-departure trade profits, and

(b) the extent to which a sum included within amount A is a sum
in respect of relevant investment income.

(9) Nothing in any double taxation arrangements is to be read as
preventing the individual from being chargeable to income tax by
virtue of this section (or as preventing a charge to that tax from
arising as a result).

(10) 5Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
avoidance) explains—

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

(b) what “the temporary period of non-residence”, “the year of
10departure” and “the period of return” mean.

(11) In this section—

• “associate” and “participator” have the same meanings as in
  Part 10 of CTA 2010 (see sections 448 and 454);

• “the distributing company” means the UK resident company
  15mentioned in section 383(1) or, as the case may be, 410(1) of
  ITTOIA 2005;

• “material participator” means a participator who has a material
  interest in the company, as defined in section 457 of CTA
  2010;

• 20“relevant time” means—

  (a)

  any time in the year of departure or, if the year of
  departure is a split year as respects the individual, the
  UK part of that year, or

  (b)

  any time in one or more of the 3 tax years preceding
  25that year;

• “trade profits of the distributing company” means the profits of
  any trade carried on by the distributing company, as
  calculated in accordance with Part 3 of CTA 2009 (trading
  income);

• 30“year of return” means the tax year consisting of or including
  the period of return.”

New special rule: chargeable event gains

137 Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance
etc) is amended as follows.

138 35After section 465A insert—

“465B Temporary non-residents

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

(2) The individual is liable for tax under this Chapter for the year of
return in respect of any gain that meets the conditions in subsection
40(3).

(3) The conditions are—

(a) the gain arose in the temporary period of non-residence,

(b) it arose from a policy issued in respect of an insurance made,
or from a contract made, before the start of that period,

(c) 45the chargeable event giving rise to it was neither a death nor
a chargeable event treated as occurring under section 525(2),

(d) no-one is liable under section 466 or 467 in respect of the gain,

(e) no-one is liable by virtue of section 468 for either the year of
return or an earlier tax year as a result of the gain, and

(f) the individual would have been liable under section 465 in
5respect of the gain, applying the assumptions in subsection
(4).

(4) The assumptions are—

(a) the individual was UK resident for the tax year in which the
gain arose, and

(b) 10that tax year was not a split year as respects the individual.

(5) If the individual is liable by virtue of subsection (2) in respect of a
gain—

(a) the amount of the gain in respect of which he or she is liable
is the amount on which tax would have been charged under
15this Chapter applying the assumptions in subsection (4), but

(b) in determining that amount, section 528 must be applied
ignoring those assumptions.

(6) That amount is treated as income of the individual for the year of
return.

(7) 20If the gain arises from a policy or contract treated under section 473A
as a single policy or contract, the date, for the purposes of subsection
(3)(b), on which the insurance or contract is made is the date on
which the first insurance is made in respect of which the connected
policies were issued or, as the case may be, the date on which the first
25of the connected contracts is made.

(8) This section does not apply to a gain if—

(a) in relation to the policy or contract from which the gain
arises, a terminal event occurs in the temporary period of
non-residence or in the period of return,

(b) 30the chargeable event giving rise to the gain occurred before
that terminal event,

(c) the chargeable event giving rise to the gain is one that is
treated as occurring under section 509(1) as a result of the
application of section 498(1)(a),

(d) 35section 498(1)(a) applies other than by virtue of section 500,
and

(e) a person (whether or not the individual) is liable for tax under
this Chapter (including by virtue of this section) in respect of
any gain resulting from the terminal event.

(9) 40Nothing in any double taxation relief arrangements is to be read as
preventing the individual from being liable for tax under this
Chapter in respect of any gain in respect of which the individual is
liable for tax by virtue of subsection (2) (or as preventing a charge to
tax on that gain from arising under this Chapter).

(10) 45Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
avoidance) 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.

(11) In this section—

• “terminal event” means an event mentioned in section 499(3);

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

139 In section 468 (non-UK resident trustees and foreign institutions), after
subsection (6) insert—

“(7) This section does not apply if someone is liable under section 465B in
10respect of the gain.”

140 In section 514 (chargeable events where transaction-related calculations
show gains), after subsection (4) insert—

“(4A) Subsection (3)(b) includes a case where a person would be liable to
tax on the gain under section 465B for the tax year in which the
15transaction occurs (because the transaction occurs in the year of
return, as defined in that section).”

141 In section 541 (calculation of deficiencies), in subsection (4)(b), after “that
section” insert “or formed part of the total income of that individual by
virtue of section 465B for the tax year mentioned in section 539(1)”.

142 20In section 552 of ICTA (information: duties of insurers), in subsection (13),
for “section 541A” substitute “section 465B or 541A”.

Part 5 Miscellaneous

Interpretation

143 25In this Schedule—

• “corporation tax” includes any amount assessable or chargeable as if it
  were corporation tax;

• “country” includes a state or territory;

• “cross-border trip” is defined in paragraph 30;

• 30“double taxation arrangements” means arrangements that have effect
  under section 2(1) of TIOPA 2010;

• “employment”—

  (a)

  has the meaning given in section 4 of ITEPA 2003, and

  (b)

  includes an office within the meaning of section 5(3) of that
  35Act;

• “enactment” means an enactment whenever passed (including this Act)
  and includes—

  (a)

  an Act of the Scottish Parliament,

  (b)

  a Measure or Act of the National Assembly for Wales,

  (c)

  40any Northern Ireland legislation as defined by section 24(5)
  of the Interpretation Act 1978, and

  (d)

  any Orders in Council, orders, rules, regulations, schemes
  warrants, byelaws and other instruments made under an

  Finance (No. 2) BillPage 550

  enactment (including anything mentioned in paragraphs (a)
  to (c) of this definition);

• “home” is to be construed in accordance with paragraph 25;

• “individual” means an individual acting in any capacity (including as
  5trustee or personal representative);

• “overseas” means anywhere outside the UK;

• “parenting leave” means maternity leave, paternity leave, adoption
  leave or parental leave (whether statutory or otherwise);

• “relevant job on board a vehicle, aircraft or ship” is defined in
  10paragraph 30;

• “ship” includes any kind of vessel (including a hovercraft);

• “significant break from overseas work” is defined in paragraph 29;

• “significant break from UK work” is defined in paragraph 29;

• “split year”, as respects an individual, means a tax year that is, as
  15respects that individual, a split year within the meaning of Part 3 of
  this Schedule;

• “trade” also includes—

  (a)

  a profession or vocation,

  (b)

  anything that is treated as a trade for income tax purposes,
  20and

  (c)

  the commercial occupation of woodlands (within the
  meaning of section 11(2) of ITTOIA 2005);

• “work” is defined in paragraph 26;

• “UK” means the United Kingdom, including the territorial sea of the
  25United Kingdom;

• “UK tie” is defined in paragraph 31;

• “whole month” means the whole of January, the whole of February and
  so on, except that the period from the start of a tax year to the end of
  April is to count as a whole month.

144 30In relation to an individual who carries on a trade—

(a) a reference in this Schedule to annual leave or parenting leave is to
reasonable amounts of time off from work for the same purposes as
the purposes for which annual leave or parenting leave is taken, and

(b) what are “reasonable amounts” is to be assessed having regard to the
35annual leave or parenting leave to which an employee might
reasonably expect to be entitled if doing similar work.

145 A reference in this Schedule to a number of days being less than a specified
number includes a case where the number of days is zero.

Consequential amendments

146 (1) 40TCGA 1992 is amended as follows.

(2) Omit section 9.

(3) In section 288 (interpretation)—

(a) in subsection (1), insert the following definition at the appropriate
place—

• 45““resident” means resident in accordance with the
  statutory residence test in Part 1 of Schedule 43 to the
  Finance Act 2013;”, and

(b) in the Table in subsection (8), omit the entry for the expressions
“resident” and “ordinarily resident”.

147 In section 27 of ITEPA 2003 (UK-based earnings for year when employee not
UK resident), in subsection (1), for “in which” substitute “for which”.

148 5In section 465 of ITTOIA 2005 (gains from contracts for life insurance etc:
liability of individuals), in subsection (1), for “in the tax year” substitute “for
the tax year”.

149 (1) Chapter 4 of Part 2 of FA 2005 (trusts with vulnerable beneficiary) is
amended as follows.

(2) 10In section 28 (vulnerable person’s liability: VQTI), for subsection (4)
substitute—

“(4) Where the vulnerable person is non-UK resident for the tax year, his
or her income tax liability for the purposes of determining TLV1 and
TLV2 is to be computed in accordance with the Income Tax Acts on
15the assumption that—

(a) he or she is UK resident for the tax year,

(b) that year is not, as respects him or her, a split year within the
meaning of Part 3 of Schedule 43 to FA 2013, and

(c) he or she is domiciled in the United Kingdom throughout
20that year.”

(3) In section 30 (qualifying trusts gains: special capital gains tax treatment)—

(a) in subsection (2)(a) and (b), for “during” substitute “for”, and

(b) omit subsection (5).

(4) In section 31 (UK resident vulnerable persons: amount of relief), in
25subsection (1), for “during” substitute “for”.

(5) In section 32 (non-UK resident vulnerable persons: amount of relief), in
subsection (1), for “during” substitute “for”.

(6) In section 41—

(a) in subsection (1), insert the following definitions in the appropriate
30places—

• ““non-UK resident” means not resident in the United
  Kingdom in accordance with the statutory residence
  test in Part 1 of Schedule 43 to FA 2013,”, and

• ““UK resident” means resident in the United Kingdom
  35in accordance with the statutory residence test in Part
  1 of Schedule 43 to FA 2013.”, and

(b) omit subsection (2).

150 (1) ITA 2007 is amended as follows.

(2) In section 809B (claim for remittance basis to apply), in subsection (1)(a), for
40“in that year” substitute “for that year”.

(3) In section 809D (application of remittance basis without claim where
unremitted foreign income and gains under £2,000), in subsection (1)(a), for
“in that year” substitute “for that year”.

(4) In section 809E (application of remittance basis without claim: other cases),
45in subsection (1)(a), for “in that year” substitute “for that year”.

(5) In section 810 (limits on liability to income tax of non-UK residents:
overview of Chapter), after subsection (3) insert—

“(4) In relation to an individual—

(a) a reference in this Chapter to a non-UK resident’s liability to
5income tax is a reference to the liability of someone who is
non-UK resident for the tax year for which the liability arises,
and

(b) accordingly, enactments under which income arising to a UK
resident in the overseas part of a split year is treated as
10arising to a non-UK resident are of no relevance to this
Chapter.”

(6) Omit sections 829 to 832.

Commencement

151 (1) Parts 1 and 2 of this Schedule have effect for determining whether
15individuals are resident or not resident in the UK for the tax year 2013-14 or
any subsequent tax year.

(2) Part 3 of this Schedule has effect in calculating an individual’s liability to
income tax or capital gains tax for the tax year 2013-14 or any subsequent tax
year.

(3) 20Part 4 of this Schedule has effect if the year of departure (as defined in that
Part) is the tax year 2013-14 or a subsequent tax year.

Transitional and saving provision

152 (1) This paragraph applies if—

(a) year X or, in Part 3 of this Schedule, the relevant year is the tax year
252013-14, 2014-15 or 2015-16, and

(b) it is necessary to determine under this Schedule whether an
individual was resident or not resident in the UK for a tax year before
the tax year 2013-14 (a “pre-commencement tax year”).

(2) The question under this Schedule is to be determined in accordance with the
30rules in force for determining an individual’s residence for that pre-
commencement tax year (and not in accordance with the statutory residence
test).

(3) But an individual may by notice in writing to Her Majesty’s Revenue and
Customs elect, as respects one or more pre-commencement tax years, for the
35question under this Schedule to be determined instead in accordance with
the statutory residence test.

(4) A notice under sub-paragraph (3)—

(a) must be given no later than the first anniversary of the end of year X
or, in a Part 3 case, the relevant year, and

(b) 40is irrevocable.

(5) Unless, in relation to a pre-commencement tax year, an election is made
under sub-paragraph (3) as respects that year—

(a) paragraph 10(b) of this Schedule has effect in relation to that year as
if the words “by virtue of meeting the automatic residence test” were
45omitted, and

(b) paragraph 16 of this Schedule has effect in relation to that year as if—

(i) in sub-paragraph (1)(b), the words “because P met the third
automatic overseas test for each of those years” were omitted,
and

(ii) 5in sub-paragraph (2)(a), the words “because P met the third
automatic overseas test for that year” were omitted.

153 (1) This paragraph applies if—

(a) year X or, for Part 3 of this Schedule, the tax year for which an
individual’s liability to tax is being calculated is the tax year 2013-14
10or a subsequent tax year, and

(b) it is necessary to determine under a provision of this Schedule, or a
provision inserted by Part 3 of this Schedule, whether a tax year
before the tax year 2013-14 (a “pre-commencement tax year”) was a
split year as respects the individual.

(2) 15The provision is to have effect as if—

(a) the reference to a split year were to a tax year to which the relevant
ESC applied, and

(b) any reference to the UK part or the overseas part of such a year were
to the part corresponding as far as possible, in accordance with the
20terms of the relevant ESC, to the UK part or the overseas part of a
split year.

(3) Where the provision also refers to cases involving actual or deemed
departure from the UK, the reference is to be read and given effect so far as
possible in accordance with the terms of the relevant ESC.

(4) 25“The relevant ESC” means whichever of the extra-statutory concessions to
which effect is given by Part 3 of this Schedule is relevant in the individual’s
case.

154 (1) This paragraph applies in determining whether the test in paragraph
108(1)(c) is met in relation to a tax year before the tax year 2013-14 (a “pre-
30commencement tax year”).

(2) Paragraph 108(1) is to have effect as if for paragraph (c) there were
substituted—

“(c) at least 4 out of the 7 tax years immediately preceding the
year of departure was a tax year meeting the following
35conditions—

(i) the individual was resident in the UK for that year,
and

(ii) there was no time in that year when the individual
was Treaty non-resident (see paragraph 110(3)).”

(3) 40Whether an individual was resident in the UK for a pre-commencement tax
year is to be determined in accordance with the rules in force for
determining an individual’s residence for that pre-commencement tax year
(and not in accordance with the statutory residence test).

155 (1) The existing temporary non-resident provisions, as in force immediately
45before the day on which this Act is passed, continue to have effect on and
after that day in any case where the year of departure (as defined in Part 4 of
this Schedule) is a tax year before the tax year 2013-14.

(2) Where those provisions continue to have effect by virtue of sub-paragraph
(1)—

(a) the question of whether a person is or is not resident in the UK for
the tax year 2013-14 or a subsequent tax year is to be determined for
5the purposes of those provisions in accordance with Part 1 of this
Schedule, but

(b) the effect of Part 3 is to be ignored.

(3) The existing temporary non-resident provisions are—

(a) section 10A of TCGA 1992 (chargeable gains),

(b) 10section 576A of ITEPA 2003 (income withdrawals under certain
foreign pensions),

(c) section 579CA of that Act (income withdrawals under registered
pension schemes), and

(d) section 832A of ITTOIA (relevant foreign income charged on
15remittance basis).

156 Section 13 of FA 2012 (Champions League final 2013) is to be read and given
effect, on and after the day on which this Act is passed, as if section 215 and
this Schedule had not been enacted.

Section 216

SCHEDULE 44 20Ordinary residence

Part 1 Income tax and capital gains tax: remittance basis of taxation

Remittance basis restricted to non-doms

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

2 25In section 809A (overview of Chapter), omit “or are not ordinarily UK
resident”.

3 In section 809B (claim for remittance basis to apply)—

(a) in subsection (1)(b), omit “or is not ordinarily UK resident in that
year”, and

(b) 30omit subsection (2).

4 In section 809D (application of remittance basis without claim where
unremitted foreign income and gains under £2,000)—

(a) in subsection (1)(b), omit “or is not ordinarily UK resident in that
year”, and

(b) 35in subsection (1A), omit “the individual is not domiciled in the
United Kingdom in that year and”.

5 In section 809E (application of remittance basis without claim: other cases),
in subsection (1)(b), omit “or is not ordinarily UK resident in that year”.

Treatment of relevant foreign earnings

6 ITEPA 2003 is amended as follows.

7 (1) In section 22 (chargeable overseas earnings for year when remittance basis
applies and employee ordinarily UK resident), in subsection (1), for
5paragraph (b) substitute—

“(b) the employee does not meet the requirement of section 26A
for that year.”

(2) Accordingly—

(a) in the heading of that section, for “ordinarily UK resident”
10substitute “outside section 26”, and

(b) in the italicised heading before that section, for “UK ordinarily resident
employees” substitute “employees outside section 26”.

8 In section 23 (calculation of “chargeable overseas earnings”), in subsection
(2), for paragraph (aa) substitute—

“(aa) 15the employee does not meet the requirement of section 26A
for that year,”.

9 (1) In section 26 (foreign earnings for year when remittance basis applies and
employee not ordinarily UK resident), in subsection (1), for “is not ordinarily
UK resident in” substitute “meets the requirement of section 26A for”.

(2) 20Accordingly—

(a) in the heading of that section, for “not ordinarily UK resident”
substitute “meets section 26A requirement”, and

(b) in the italicised heading before that section, for “not UK ordinarily
resident” substitute “who meet section 26A requirement”.

10 25After that section insert—

“26A Section 26: requirement for 3-year period of non-residence

(1) An employee meets the requirement of this section for a tax year if
the employee was—

(a) non-UK resident for the previous 3 tax years, or

(b) 30UK resident for the previous tax year but non-UK resident for
the 3 tax years before that, or

(c) UK resident for the previous 2 tax years but non-UK resident
for the 3 tax years before that, or

(d) non-UK resident for the previous tax year, UK resident for
35the tax year before that and non-UK resident for the 3 tax
years before that.

(2) The residence status of the employee before the 3 years of non-UK
residence is not relevant for these purposes.”

11 (1) Section 41C (foreign securities income) is amended as follows.

(2) 40In subsection (4), for paragraph (b) substitute—

“(b) the individual does not meet the requirement of section 26A
for the year (reading references there to the employee as
references to the individual),”.

(3) In subsection (6), for paragraph (b) substitute—

“(b) the individual meets the requirement of section 26A for the
year (reading references there to the employee as references
to the individual), and”.

12 5In section 271 (limited exemption of removal benefits and expenses:
general), in subsection (2)—

(a) in paragraph (a), for “ordinarily UK resident” substitute “outside
section 26”, and

(b) in paragraph (b), for “not ordinarily UK resident” substitute “meets
10section 26A requirement”.

13 (1) In section 554Z9 (remittance basis: A is ordinarily UK resident), in
subsection (1), for paragraph (c) substitute—

“(c) A does not meet the requirement of section 26A for the
relevant tax year (reading references there to the employee as
15references to A),”.

(2) Accordingly, in the heading of that section, for “A is ordinarily UK
resident” substitute “A does not meet section 26A requirement”.

14 (1) In section 554Z10 (remittance basis: A is not ordinarily resident), in
subsection (1), for paragraph (c) substitute—

“(c) 20A meets the requirement of section 26A for the relevant tax
year (reading references there to the employee as references
to A).”

(2) Accordingly, in the heading of that section, for “A is not ordinarily
resident” substitute “A meets section 26A requirement”.

15 (1) 25Section 690 (employee non-resident etc) is amended as follows.

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

“(a) is either non-UK resident for the tax year or is UK resident
but meets the requirement of section 26A for the tax year,
and”.

(3) 30In subsection (2A), for “but not ordinarily resident in a tax year” substitute
“for a tax year but not domiciled in the United Kingdom in that tax year”.

Consequential amendments

16 In section 266A of ICTA (life assurance premiums paid by employer), in
subsection (8)—

(a) 35in paragraph (a), for “employee resident and ordinarily resident, but
not domiciled, in UK” substitute “remittance basis applies and
employee outside section 26”, and

(b) in paragraph (b), for “employee resident, but not ordinarily resident,
in UK” substitute “remittance basis applies and employee meets
40section 26A requirement”.

17 In section 12 of TCGA 1992 (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—