Session 2013 - 14
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Finance Bill


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

543

 

“relevant scheme” means an employee-financed retirement

benefits scheme (within the meaning of that Chapter) or a

superannuation fund to which section 615(3) of ICTA

applies.”

125        

In that Chapter, after section 554Z11 insert—

5

“554Z11A 

Temporary non-residents

(1)   

This section applies if A is temporarily non-resident.

(2)   

Any amount within subsection (3) is to be treated for the purposes of

section 554Z9(2) or (as the case may be) 554Z10(2) as if it were

remitted to the United Kingdom in the period of return.

10

(3)   

An amount is within this subsection if—

(a)   

it is all or part of a relevant benefit provided to a relevant

person (see section 554C(2)) under a relevant scheme,

(b)   

it is provided in the form of the lump sum,

(c)   

it is remitted to the United Kingdom in the temporary period

15

of non-residence, and

(d)   

ignoring this section—

(i)   

no charge to tax arises by virtue of section 554Z9(2) or

554Z10(2) in respect of it, but

(ii)   

such a charge would arise by virtue of one of those

20

sections 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.

(5)   

Nothing in any double taxation relief arrangements is to be read as

25

preventing A from being chargeable to income tax in respect of any

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-

30

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.

35

(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

40

6;

“relevant scheme” means an employee-financed retirement

benefits scheme (within the meaning of that Chapter) or a

superannuation fund to which section 615(3) of ICTA applies;

“remitted to the United Kingdom” has the same meaning as in

45

Chapter A1 of Part 14 of ITA 2007.”

 
 

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

544

 

126        

In that Chapter, in section 554Z12 (relevant step taken after A’s death etc),

after subsection (8) insert—

“(9)   

Section 554Z4A and section 554Z11A apply for the purposes of

subsection (4) as for the purposes of section 554Z2 and section

554Z9(2) or 554Z10(2) respectively (reading references in sections

5

554Z4A and 554Z11A to “A” as references to “the relevant person”).

(10)   

But those sections do not apply for the purposes of subsection (4) if

the relevant person’s temporary period of non-residence began

before A died.”

127        

In Chapter 3 of Part 9 (United Kingdom pensions: general rules), after

10

section 572 insert—

“572A   

Temporary non-residents

(1)   

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

(2)   

Any pension within subsection (3) is to be treated for the purposes of

section 571 as if it accrued in the period of return.

15

(3)   

A pension is within this subsection if—

(a)   

section 569 applies to it,

(b)   

it is in the form of a lump sum,

(c)   

it accrued in the temporary period of non-residence, and

(d)   

ignoring this section—

20

(i)   

it is not chargeable to tax under this Chapter, but

(ii)   

it would be so chargeable if the existence of any

double taxation relief arrangements were

disregarded.

(4)   

Subsection (3)(d)(i) includes a case where the charge could be

25

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

preventing the individual from being chargeable to income tax in

respect of any pension treated by virtue of this section as accruing in

the period of return (or as preventing a charge to that tax from

30

arising as a result).

(6)   

Part 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

35

(b)   

what “the temporary period of non-residence” and “the

period of return” mean.

(7)   

In this section—

“double taxation relief arrangements” means arrangements that

have effect under section 2(1) of TIOPA 2010;

40

“DTR claim” means a claim for relief under section 6 of that

Act.”

128   (1)  

In Chapter 1 of Part 11 (pay as you earn: introduction), section 683 is

amended as follows.

 
 

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

545

 

      (2)  

After subsection (3) insert—

“(3ZA)   

“PAYE employment income” for a tax year does not include any

taxable specific income treated as paid or received in that tax year by

section 394A or 554Z4A (temporary non-residents).”

      (3)  

For subsection (3B) substitute—

5

“(3B)   

“PAYE pension income” for a tax year does not include any taxable

pension income that is treated as accruing in that tax year by section

572A or 579CA (temporary non-residents).”

New special rule: distributions to participators in close companies etc

129        

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

10

follows.

130        

In Chapter 1 (introduction), after section 368 insert—

“368A   

Interpretation of special rules for temporary non-residents

(1)   

This section concerns provisions of this Part that are expressed to

apply if an individual is “temporarily non-resident” (“TNR

15

provisions”).

(2)   

Part 4 of Schedule 43 to FA 2013 (statutory residence test: anti-

avoidance) explains for the purposes of TNR provisions—

(a)   

when an individual is to be regarded as “temporarily non-

resident”, and

20

(b)   

what the following terms mean—

(i)   

“the temporary period of non-residence”,

(ii)   

“the year of departure”, and

(iii)   

“the period of return”.

(3)   

A reference in TNR provisions to “the year of return” is to the tax

25

year consisting of or including the period of return.

(4)   

Nothing in any double taxation relief arrangements is to be read as

preventing the individual from being chargeable to income tax by

virtue of any TNR provisions (or as preventing a charge to that tax

from arising as a result).

30

(5)   

In this section and in TNR provisions, “double taxation relief

arrangements” means arrangements that have effect under section

2(1) of TIOPA 2010.”

131        

In Chapter 3 (dividends etc from UK resident companies and tax credits etc

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

35

“Anti-avoidance

401C    

Temporary non-residents

(1)   

This section applies if—

(a)   

an individual is temporarily non-resident,

(b)   

a relevant distribution is made or treated as made to the

40

individual in the temporary period of non-residence,

 
 

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

546

 

(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

resident, 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

5

double taxation relief arrangements were disregarded.

(2)   

Subsections (3) and (4) have effect in cases where the distribution

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

10

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

distribution 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

15

return under Step 6 of the calculation in section 23.

(5)   

If the distribution year is the year of return, the tax charged under

this Chapter in respect of the relevant distribution is to be charged

and assessed without regard to the existence of double taxation relief

arrangements.

20

(6)   

For the purposes of this section, a dividend or other distribution is a

“relevant distribution” if—

(a)   

it 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—

25

(i)   

a material participator in the company, or

(ii)   

an associate of a material participator in the company.

(7)   

But 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.

30

(8)   

“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

35

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.

(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.

40

(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

attributable on a just and reasonable basis to the relevant

distribution.

(11)   

If section 393 applies, references in this section to a distribution being

45

made to the individual are to a cash dividend being paid over to the

individual.

 
 

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

547

 

(12)   

In 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;

5

“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

10

that 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

15

insert—

“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

20

this 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,

25

(b)   

it 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

30

(ii)   

an 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

35

(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)   

“associate” and “participator” have the same meanings as in

40

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)   

any time in the year of departure or, if the year of

45

departure is a split year as respects the individual, the

UK part of that year, or

 
 

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

548

 

(ii)   

any 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

5

fact made.

(5)   

If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies

to 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

10

United Kingdom in the period of return.

(6)   

This section does not apply to a dividend within subsection (3) to the

extent 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

15

that begins after the start of the temporary period of non-

residence, and

(b)   

so 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

20

time after the start of that temporary period.

(8)   

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.

(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

25

over to the individual or (as the case may be) a dividend being

treated as paid to the individual.

(10)   

In this section—

“remitted to the United Kingdom” has the meaning given in

Chapter A1 of Part 14 of ITA 2007;

30

“trade profits of the company” means the profits of any trade

carried on by the company, as they would be calculated in

accordance 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

35

413 insert—

“413A   

Temporary non-residents

(1)   

This section applies if—

(a)   

an individual is temporarily non-resident,

(b)   

relevant stock dividend income is treated under this Chapter

40

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,

and

45

(d)   

the amount of income tax charged on the relevant stock

dividend income under this Chapter is less than it would

 
 

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

549

 

have been if the existence of double taxation relief

arrangements were disregarded.

(2)   

Subsections (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

5

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

relevant stock dividend income disregarding any double taxation

relief arrangements.

10

(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

for 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

15

charged and assessed without regard to the existence of double

taxation relief arrangements.

(6)   

Stock 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

20

(b)   

the individual is beneficially entitled to that share capital or

bonus share capital 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.

(7)   

But stock dividend income within subsection (6) is not “relevant

25

stock dividend income” to the extent that the share capital or bonus

share capital is issued in respect of post-departure trade profits.

(8)   

“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

30

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

basis) to a time after the start of that temporary period.

35

(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

much of the income tax paid by the individual for the arising year as

40

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);

“material participator” means a participator who has a material

45

interest in the company, as defined in section 457 of that Act;

“relevant time” means—

 
 

 
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Revised 8 May 2013