Session 2013 - 14
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Finance Bill


Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

522

 

(ii)   

if 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

5

subsection (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—

10

(a)   

the 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

15

sections 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—

20

(a)   

the 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

25

general 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.”

30

66    (1)  

Section 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

35

(b)   

a 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

40

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)   

The extent to which—

(a)   

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

45

(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,

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

523

 

   

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

      (3)  

After 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.”

5

67         

In section 554Z6 (overlap with certain earnings), in subsection (1)(a), after

“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)—

10

(a)   

in paragraph (b), after “that income” insert “(or of so much of it as is

attributable 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

15

follows.

      (2)  

In 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,”.

20

      (3)  

For subsection (2) substitute—

“(2)   

The 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,

25

   

is “taxable specific income” in a tax year so far as the overseas portion

is 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

30

that income, or of the relevant part of it, as is not in respect of UK

duties.

(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—

35

“(4)   

The extent to which—

(a)   

the employment income, or the relevant part of it, is not in

respect of UK duties, or

(b)   

so 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

40

not in respect of UK duties,

   

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

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

524

 

Special charging rules for pension income

70    (1)  

Section 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—

5

“(1A)   

If the person liable for the tax under this Part is an individual and the

tax 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.”

10

      (4)  

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

of the tax year”.

PAYE income

71    (1)  

Section 690 of ITEPA 2003 (employee non-residents etc) is amended as

follows.

15

      (2)  

In subsection (1), omit “only”.

      (3)  

After 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

20

employee, and

(b)   

the 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.

25

73         

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

“(2A)   

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.”

74    (1)  

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

30

follows.

      (2)  

For subsection (1) substitute—

“(1)   

This section applies if—

(a)   

an individual carries on a trade otherwise than in

partnership, and

35

(b)   

there 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—

40

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

525

 

(a)   

in 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

5

is 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

10

subsection (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)

15

insert—

“(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.

20

      (2)  

For 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—

25

“(8)   

Subsections (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—

30

“(5)   

If 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.”

      (3)  

After that subsection insert—

35

“(5A)   

Subsections (1A) and (1B) of section 17 apply for the purposes of

subsection (5).”

Special charging rules for property income

79         

In section 270 of ITTOIA 2005 (profits of property businesses: income

charged), after subsection (2) insert—

40

“(3)   

If, as respects an individual carrying on an overseas property

business, the tax year is a split year—

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

526

 

(a)   

tax is charged under this Chapter on so much of the profits

referred 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.

5

(4)   

In determining how much of the profits arise in the UK part of the tax

year—

(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,

10

and

(b)   

then 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)—

15

“CAA allowances” means allowances treated under section 250

or 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;

20

“non-CAA profits” means profits before account is taken of any

CAA 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.

25

81         

In section 368 (territorial scope of charges in respect of savings and

investment 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.”

30

82         

In section 465 (person liable for tax on gains from life insurance etc:

individuals), 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).”

35

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,”.

40

84    (1)  

Section 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

45

substituted has effect.

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

527

 

      (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)   

days falling within any tax year for which the individual is

5

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

(1)(b)” substitute “foreign days”.

10

      (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)

so far as that section as so in force continues to have effect after the

15

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)   

“Foreign days” are—

20

(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)  

In subsection (3), in the definition of “A”, for the words from “on which” to

25

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)  

In subsection (1)(b), for the words from “on which” to the end substitute

30

“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—

35

“(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

respects the deceased, or

(ii)   

in the UK part of a tax year that was a split

40

year as respects the deceased.”

      (4)  

After that subsection insert—

“(2A)   

“Foreign days” are—

 
 

Finance Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment

528

 

(a)   

days 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

5

falling” 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.

10

      (2)  

The 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—

15

(a)   

divide 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

20

(c)   

reduce 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

25

amended.

      (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,

30

(b)   

if 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

35

87         

In section 577 (territorial scope of charges in respect of miscellaneous

income), after subsection (2) insert—

“(2A)   

If income arising to an individual who is UK resident arises in the

overseas part of a split year, it is to be treated for the purposes of this

section as arising to a non-UK resident.”

40

Special charging rules for relevant foreign income charged on remittance basis

88         

In section 832 of ITTOIA 2005 (relevant foreign income charged on

 
 

 
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