Finance Bill

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
536

(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).
5
(4)
A “relevant withdrawal” is any income withdrawal or dependants’
income 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
10
preventing the person from being chargeable to income tax in respect
of 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-
15
avoidance) explains—
(a)
when 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.
20
(7)
In this section—
“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
25
which section 165(3A) or 167(2A) of FA 2004 applies.”
116
In 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
30
subsection (3) that is remitted to the United Kingdom in the
temporary 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
35
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
40
preventing 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-
45
avoidance) explains—

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
537

(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)
In this section, “double taxation relief arrangements” means
5
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)
This section applies if an individual (“the taxpayer”) is temporarily
10
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)
The gains and losses within this subsection are—
15
(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
assumption were made,
20
(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
having accrued to the taxpayer in a tax year falling wholly in
25
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
for the tax year in which the gain or loss accrued to the
30
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)
But—
35
(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)
a loss is not within subsection (3) if the test in paragraph (a)
40
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)—

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
538

(a)
calculate separately, for each tax year falling wholly or partly
in 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)—
5
“sum A” is the aggregate of the losses that were not available in
accordance 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
10
“sum B” is the amount of the gains that did not accrue to the
taxpayer 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
15
falling within subsection (3) by virtue of paragraph (a) of that
subsection 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:
20
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.
25
(11)
In this section—
“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;
30
“the year of return” means the tax year that consists of or
includes 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—
35
(a)
the asset was acquired by the taxpayer in the temporary
period 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
40
accrued,
(c)
the asset is not an interest created by or arising under a
settlement, and
(d)
the amount or value of the consideration for the acquisition
of the asset by the taxpayer does not fall, by reference to any
45
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).

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
539

(2)
“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
5
treated 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
10
actually 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
15
charge 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
20
of 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—
25
(a)
chargeable 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
30
are 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
35
which 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
40
appropriate amount.
(4)
The appropriate amount is—
(a)
the sum of the amounts mentioned in subsection (1)(c) to the
extent that the matched capital payments are matched under
section 87A with the section 2(2) amount for year A, or
45
(b)
if the property comprised in the settlement has at any time
included property not originating from the settlor, so much

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
540

(if any) of that sum as, on a just and reasonable
apportionment, 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—
5
(a)
all the reductions to be made under subsection (3) for that
year 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.
10
(6)
Subsection (7) applies if, with respect to year A, an amount remains
to 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
15
the settlors) is to be applied in reducing so much of the section 2(2)
amount 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—
20
(a)
“the settlement” means the settlement in relation to which the
settlor 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
25
meanings as in section 10A, and
(d)
paragraph 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
30
was not so resident if—
(a)
section 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.
35
      (2)
In subsection (7), for “year of return” substitute “period of return”.
      (3)
In 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”.
40
      (3)
In paragraph 12(1)—
(a)
for paragraph (a) substitute—
“(a)
by virtue of section 10A, an amount of chargeable
gains within section 86(1)(e) that accrued in a tax
year (“year A”) to the trustees of a settlement
45

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
541

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)
In paragraph 12(2), for “year of return” substitute “period of return”.
      (5)
In paragraph 12A(1)—
5
(a)
for “year of return” substitute “period of return”, and
(b)
for “an intervening year” substitute “the temporary period of non-
residence”.
New special rule: lump sum payments under pension schemes etc
122
ITEPA 2003 is amended as follows.
10
123
In Chapter 2 of Part 6 (employer-financed retirement benefits), after section
394 insert—
“394A
Temporary non-residents
(1)
This section applies if an individual is temporarily non-resident.
(2)
Any benefits within subsection (3) are to be treated for the purposes
15
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)
this Chapter applies to it,
(b)
it is in the form of a lump sum,
20
(c)
it is received by the individual in the temporary period of
non-residence, and
(d)
ignoring this section—
(i)
no charge to tax arises by virtue of section 394(1) in
respect of it, but
25
(ii)
such a charge would arise if the existence of any
double taxation relief arrangements were
disregarded.
(4)
Subsection (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.
30
(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
received).
(6)
Nothing in any double taxation relief arrangements is to be read as
35
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).
(7)
Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-
40
avoidance) explains—
(a)
when an individual is to be regarded as “temporarily non-
resident”, and

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
542

(b)
what “the temporary period of non-residence” and “the
period of return” mean.
(8)
In this section—
“double taxation relief arrangements” means arrangements that
have effect under section 2(1) of TIOPA 2010;
5
“DTR claim” means a claim for relief under section 6 of that
Act.”
124
In Chapter 2 of Part 7A (employment income provided through third
parties: treatment of relevant step for income tax purposes), after section
554Z4 insert—
10
“554Z4A
Temporary non-residents
(1)
This section applies if A is temporarily non-resident.
(2)
Any relevant step within subsection (3) is to be treated for the
purposes of section 554Z2 as if it were taken in the period of return.
(3)
A relevant step is within this subsection if—
15
(a)
it is the payment of a lump sum to a relevant person (see
section 554C(2)),
(b)
the lump sum is a relevant benefit provided under a relevant
scheme,
(c)
the step is taken in the temporary period of non-residence,
20
and
(d)
ignoring this section—
(i)
no charge to tax arises by virtue of section 554Z2 by
reason of the step, but
(ii)
such a charge would arise if the existence of any
25
double taxation relief arrangements were
disregarded.
(4)
Subsection (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)
Nothing in any double taxation relief arrangements is to be read as
30
preventing A from being chargeable to income tax in respect of any
relevant step treated by virtue of this section as taken 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-
35
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.
40
(7)
In this section—
“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;
“relevant benefit” has the same meaning as in Chapter 2 of Part
45
6;