Finance Bill

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
564

(c)
if the individual was not resident in the United Kingdom for the tax
year 2011-12, foreign income and gains for the tax year 2013-14, the
tax year 2014-15 and the tax year 2015-16.
      (4)
Where, by virtue of this paragraph, it is necessary to determine whether an
individual is (or is not) ordinarily resident in the United Kingdom at a time
5
on or after 6 April 2013, the question is to be determined as it would have
been in the absence of this Schedule.
Interpretation
27
References in this Part of this Schedule to an individual’s “foreign income
and gains” for a tax year are to be read in accordance with section 809Z7 of
10
ITA 2007 (interpretation of remittance basis rules).
Part 2
Income tax: arising basis of taxation
ICTA
28
In section 614 of ICTA (exemptions and reliefs in respect of income from
15
investments etc of certain pension schemes)—
(a)
in subsection (4), for “not domiciled, ordinarily resident or resident”
substitute “not domiciled and not resident”, and
(b)
in subsection (5), for “not domiciled, ordinarily resident or resident”
substitute “not domiciled and not resident”.
20
ITEPA 2003
29
ITEPA 2003 is amended as follows.
30
In section 56 (application of Income Tax Acts in relation to deemed
employment), in subsection (5)—
(a)
for paragraph (a) substitute—
25
“(a)
the worker being resident or domiciled outside the
United Kingdom or meeting the requirement of
section 26A,”, and
(b)
in paragraph (b), omit “or ordinarily resident”.
31
In section 61G (application of Income Tax Acts in relation to deemed
30
employment), in subsection (5)—
(a)
for paragraph (a) substitute—
“(a)
the worker being resident or domiciled outside the
United Kingdom or meeting the requirement of
section 26A,”, and
35
(b)
in paragraph (b), omit “or ordinarily resident”.
32
In section 328 (the income from which deductions may be made), in
subsection (5), omit the entry for Chapter 6 of Part 5 and the word “and”
immediately preceding it.
33
In section 341 (travel at start or finish of overseas employment), in
40
subsection (3), for “resident and ordinarily resident in the United Kingdom”
substitute “UK resident”.

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
565

34
In section 342 (travel between employments where duties performed
abroad), in subsection (6), for “resident and ordinarily resident in the United
Kingdom” substitute “UK resident”.
35
In section 370 (travel costs where duties performed abroad: employee’s
travel), in subsection (6), omit “in which the employee is ordinarily UK
5
resident”.
36
In section 376 (foreign accommodation and subsistence costs and expenses
(overseas employments)), in subsection (1)(b), for “resident and ordinarily
resident in the United Kingdom” substitute “UK resident”.
37    (1)
Section 378 (deductions from seafarers’ earnings: eligibility) is amended as
10
follows.
      (2)
In subsection (1), for “relevant taxable earnings or EEA-resident earnings”
substitute “relevant general earnings”.
      (3)
For subsection (5) substitute—
“(5)
“Relevant general earnings” means—
15
(a)
taxable earnings under section 15, 22 or 26, or
(b)
general earnings—
(i)
to which section 27 applies, and
(ii)
which are for a period in which the employee is liable
under the law of an EEA State (other than the United
20
Kingdom) to tax in that State by reason of domicile or
residence.”
      (4)
Omit subsection (6).
38
In section 413 (exception in certain cases of foreign service), in subsection
(3A), before paragraph (a) insert—
25
“(za)
for service in or after the tax year 2013-14, earnings for a tax
year that are earnings to which section 15 applies and to
which that section would apply even if the employee made a
claim under section 809B of ITA 2007 (claim for remittance
basis) for that year,”.
30
39    (1)
In section 681A (foreign benefits of consular employees), for subsection (4)
substitute—
“(4)
Condition C is that—
(a)
the officer or employee is a permanent employee of that state,
or
35
(b)
the officer or employee was non-UK resident for each of the
2 tax years preceding the tax year in which the officer or
employee became a consular officer or employee in the
United Kingdom of that state.”
      (2)
The amendment made by this paragraph does not apply to a person who
40
became a consular officer or employee in the United Kingdom before 6 April
2013.
40    (1)
In Schedule 2 (approved share incentive plans), in paragraph 8(2), omit
paragraph (b) and the “and” immediately before it.

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
566

      (2)
The amendments made by this paragraph do not apply to plans that have
been approved before the day on which this Act is passed.
41    (1)
In Schedule 3 (approved SAYE option schemes), in paragraph 6(2)—
(a)
insert “and” at the end of paragraph (c), and
(b)
omit paragraph (ca), including the “and” at the end of it.
5
      (2)
The amendments made by this paragraph do not apply to schemes that have
been approved before the day on which this Act is passed.
42
In Schedule 5 (enterprise management incentives), in paragraph 27(3)(b),
omit “and ordinarily resident”.
ITTOIA 2005
10
43
ITTOIA 2005 is amended as follows.
44
In section 154A (certain non-UK residents with interest on 3½% War Loan
1952 Or After), in subsection (1)(a), omit “ordinarily”.
45
In section 459 (transfer of assets abroad), in subsection (2), for “an individual
ordinarily UK resident” substitute “a UK resident individual”.
15
46
In section 468 (non-UK resident trustees and foreign institutions), for
subsection (2) substitute—
“(2)
Chapter 2 of Part 13 of ITA 2007 (which prevents avoidance of tax
where a UK resident individual benefits from a transfer of assets)
applies with the modifications specified in subsection (3) or (4).”
20
47
In section 569 (anti-avoidance: transfer of assets abroad), in subsection (2),
for “an individual ordinarily UK resident” substitute “a UK resident
individual”.
48    (1)
In section 636 (calculation of undistributed income), in subsection (2)(b), for
“, resident and ordinarily resident” substitute “and resident”.
25
      (2)
The amendment made by this paragraph does not apply in calculating
income arising under a settlement in tax years ending before 6 April 2013.
49
In section 648 (income arising under a settlement), in subsection (1)(b), for “,
resident and ordinarily resident” substitute “and resident”.
50
In section 651 (meaning of “UK estate” and “foreign estate”), in subsection
30
(3), omit “or not ordinarily UK resident”.
51
In section 664 (the aggregate income of the estate), in subsection (2)(b)(i),
omit “who was ordinarily UK resident”.
52    (1)
Section 715 (interest from FOTRA securities held on trust) is amended as
follows.
35
      (2)
In subsection (1)(b), for “person not ordinarily UK resident” substitute “non-
UK resident person”.
      (3)
In subsection (2)—
(a)
for “person not ordinarily UK resident” substitute “non-UK resident
person”, and
40
(b)
for “is ordinarily UK resident at the time when” substitute “is UK
resident for the tax year in which”.

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
567

      (4)
In relation to a FOTRA security issued before 6 April 2013, the amendments
made by this paragraph apply only if the security was acquired by the trust
on or after that date.
53    (1)
In section 771 (relevant foreign income of consular officers and employees),
for subsection (4) substitute—
5
“(4)
Condition C is that—
(a)
the officer or employee is a permanent employee of that state,
or
(b)
the officer or employee was non-UK resident for each of the
2 tax years preceding the tax year in which the officer or
10
employee became a consular officer or employee in the
United Kingdom of that state.”
      (2)
The amendment made by this paragraph does not apply to a person who
became a consular officer or employee in the United Kingdom before 6 April
2013.
15
ITA 2007
54
ITA 2007 is amended as follows.
55
In section 465 (overview of Chapter 2 and interpretation), in subsection (4),
omit “and ordinary residence”.
56    (1)
Section 475 (residence of trustees) is amended as follows.
20
      (2)
For subsection (1) substitute—
“(1)
This section applies for income tax purposes and explains how to
work out, in relation to the trustees of a settlement, whether or not
the single person mentioned in section 474(1) is UK resident.”
      (3)
In subsection (2), for “both UK resident and ordinarily UK resident”
25
substitute “UK resident”.
      (4)
In subsection (3), for “both non-UK resident and not ordinarily UK resident”
substitute “non-UK resident”.
57    (1)
Section 476 (how to work out whether settlor meets condition C) is amended
as follows.
30
      (2)
In subsection (2)(b), omit “, ordinarily UK resident”.
      (3)
In subsection (3)(b), omit “, ordinarily UK resident”.
      (4)
The amendment made by sub-paragraph (2) does not apply if the person
died before 6 April 2013.
      (5)
The amendment made by sub-paragraph (3) does not apply if the settlement
35
was made before 6 April 2013.
58
In section 643 (non-residents), in subsection (1), omit “and is not ordinarily
UK resident during that year”.
59
In section 718 (meaning of “person abroad” etc), in subsection (2)(b), for
“neither UK resident nor ordinarily UK resident” substitute “non-UK
40
resident”.

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
568

60
In section 720 (charge to tax on income treated as arising under section 721),
in subsection (1), omit “ordinarily”.
61    (1)
Section 721 (individuals with power to enjoy income as a result of relevant
transactions) is amended as follows.
      (2)
In subsection (1), for “conditions A and B” substitute “conditions A to C”.
5
      (3)
After subsection (3) insert—
“(3A)
Condition C is that the individual is UK resident for the tax year.”
      (4)
In subsection (5), for paragraph (b) substitute—
“(b)
whether the individual is UK resident for the tax year in
which the relevant transfer is made (if different from the tax
10
year mentioned in subsection (1)), or”.
62
In section 727 (charge to tax on income treated as arising under section 728),
in subsection (1), omit “ordinarily”.
63    (1)
Section 728 (individuals receiving capital sums as a result of relevant
transactions) is amended as follows.
15
      (2)
In subsection (1)—
(a)
in paragraph (a), omit the “and” at the end of sub-paragraph (iii), and
(b)
at the end of paragraph (b) insert “, and
(c)
the individual is UK resident for the tax year.”
      (3)
In subsection (3), for paragraph (b) substitute—
20
“(b)
whether the individual is UK resident for the tax year in
which the relevant transfer abroad is made (if different from
the tax year mentioned in subsection (1)), or”.
64
In section 732 (non-transferors receiving benefit as a result of relevant
transactions), in subsection (1)(b), for “ordinarily UK resident receives a
25
benefit” substitute “UK resident for a tax year receives a benefit in that tax
year”.
65    (1)
In section 749 (restrictions on particulars to be provided by relevant
lawyers), in subsection (2), omit “ordinarily”.
      (2)
The amendment made by this paragraph applies only if the transfer is made
30
or, in the case of an associated operation, the transfer is made and the
associated operation is effected on or after 6 April 2013.
66
In section 812 (case where limit on liability of non-UK residents is not to
apply), in subsection (1)(a), omit “ordinarily”.
67    (1)
In section 834 (residence of personal representatives), in subsection (3), omit
35
“, ordinarily UK resident”.
      (2)
The amendment made by this paragraph does not apply if D died before 6
April 2013.
68    (1)
In section 858 (declarations of non-UK residence: individuals)—
(a)
in subsection (3)(a) and (b), for “not ordinarily UK resident”
40
substitute “non-UK resident”, and
(b)
in subsection (4), omit “ordinarily”.

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
569

      (2)
The amendments made by this paragraph apply to the making of
declarations on or after 6 April 2014, and any declarations made before that
date continue to have effect in respect of interest paid on or after that date as
if those amendments had not been made.
69    (1)
In section 859 (declarations of non-UK residence: Scottish partnerships)—
5
(a)
in subsection (3), for “not ordinarily UK resident” substitute “non-
UK resident”, and
(b)
in subsection (4), omit “ordinarily”.
      (2)
The amendments made by this paragraph apply to the making of
declarations on or after 6 April 2014, and any declarations made before that
10
date continue to have effect in respect of interest paid on or after that date as
if those amendments had not been made.
70    (1)
In section 860 (declarations of non-UK residence: personal representatives),
in subsection (3), for “not ordinarily UK resident” substitute “non-UK
resident”.
15
      (2)
The amendment made by this paragraph applies only if the deceased died
on or after 6 April 2014.
71    (1)
Section 861 (declarations of non-UK residence: settlements) is amended as
follows.
      (2)
In subsection (3)(b)(i) and (iii), omit “ordinarily”.
20
      (3)
In subsection (4)—
(a)
in paragraphs (b) and (d), omit “ordinarily”, and
(b)
in paragraph (f), for “an ordinarily” substitute “a”.
      (4)
The amendments made by this paragraph apply to the making of
declarations on or after 6 April 2014, and any declarations made before that
25
date continue to have effect in respect of interest paid on or after that date as
if those amendments had not been made.
Commencement
72    (1)
The amendments made by this Part of this Schedule have effect for the
purposes of a person’s liability to income tax for the tax year 2013-14 or any
30
subsequent tax year.
      (2)
Sub-paragraph (1) is without prejudice to any provision in this Part of the
Schedule about the application of a particular amendment.
Savings
73    (1)
This paragraph applies to an individual who—
35
(a)
was not resident in the United Kingdom for the tax year 2009-10,
(b)
is resident there for the tax year 2012-13, but
(c)
is not ordinarily resident there at the end of the tax year 2012-13.
      (2)
The provisions listed in sub-paragraph (3) have effect, in relation to such an
individual and a qualifying tax year, as if the amendments made to or with
40
respect to those provisions by this Part of this Schedule had not been made.
      (3)
The provisions are—

Finance Bill
Schedule 44 — Ordinary residence
Part 3 — Capital gains tax: accruals basis of taxation
570

(a)
section 413 of ITEPA 2003 (exception for payments and benefits on
termination of employment etc in certain cases involving foreign
service),
(b)
section 414 of that Act (reduction in other cases of foreign service),
and
5
(c)
Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad).
      (4)
But, in the case of provisions within paragraph (a) or (b) of sub-paragraph
(3), this paragraph applies only if service in the employment in question
began before the start of the tax year 2013-14.
      (5)
The meaning of “qualifying tax year” depends on the individual’s residence
10
status—
(a)
if the individual was resident in the United Kingdom for the tax year
2010-11 and the tax year 2011-12, “qualifying tax year” means the tax
year 2013-14,
(b)
if the individual was not resident in the United Kingdom for the tax
15
year 2010-11 but was resident in the United Kingdom for the tax year
2011-12, “qualifying tax year” means each of the tax year 2013-14 and
the tax year 2014-15, and
(c)
if the individual was not resident in the United Kingdom for the tax
year 2011-12, “qualifying tax year” means each of the tax year 2013-
20
14, the tax year 2014-15 and the tax year 2015-16.
      (6)
Where, by virtue of this paragraph, it is necessary to determine whether an
individual is (or is not) ordinarily resident in the United Kingdom at a time
on or after 6 April 2013, the question is to be determined as it would have
been in the absence of this Schedule.
25
Part 3
Capital gains tax: accruals basis of taxation
TCGA 1992
74
TCGA 1992 is amended as follows.
75    (1)
Section 2 (persons and gains chargeable to capital gains tax, and allowable
30
losses) is amended as follows.
      (2)
In subsection (1), for the words from “during any part” to the end substitute
“if the residence condition is met”.
      (3)
After that subsection insert—
“(1A)
The residence condition is—
35
(a)
in the case of an individual, that the individual is resident in
the United Kingdom for the year in question,
(b)
in the case of personal representatives of a deceased person,
that the single and continuing body mentioned in section
62(3) is resident in the United Kingdom,
40
(c)
in the case of the trustees of a settlement, that the single
person mentioned in section 69(1) is resident in the United
Kingdom during any part of the year in question, and
(d)
in any other case, that the person is resident in the United
Kingdom when the gain accrues.”
45