Finance Bill

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
497

      (3)
For subsection (3) substitute—
“(3)
The trusts on which property is held are not to be treated as failing to
secure that the conditions in subsection (2) are met by reason only
of—
(a)
the trustees’ having powers that enable them to apply in any
5
tax year otherwise than for the benefit of the disabled person
amounts (whether consisting of income or capital, or both)
not exceeding the annual limit,
(b)
the trustees’ having the powers conferred by section 32 of the
Trustee Act 1925 (powers of advancement),
10
(c)
the trustees’ having those powers but free from, or subject to
a less restrictive limitation than, the limitation imposed by
proviso (a) of subsection (1) of that section,
(d)
the trustees’ having the powers conferred by section 33 of the
Trustee Act (Northern Ireland) 1958 (corresponding
15
provision for Northern Ireland),
(e)
the trustees’ having those powers but free from, or subject to
a less restrictive limitation than, the limitation imposed by
subsection (1)(a) of that section, or
(f)
the trustees’ having powers to the like effect as the powers
20
mentioned in any of paragraphs (b) to (e).
(3B)
For the purposes of this section, the “annual limit” for a tax year is
whichever is the lower of the following amounts—
(a)
£3,000, and
(b)
3% of the amount that is the maximum value of the settled
25
property during the tax year in question.
(3C)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (3)(a) is, or is not,
to apply in relation to a trust, and
(b)
amend the definition of “the annual limit” in subsection (3B).
30
(3D)
An order under subsection (3C) may—
(a)
make different provision for different cases, and
(b)
contain transitional and saving provision.
(3E)
A statutory instrument containing an order under subsection (3C)
may not be made unless a draft of the instrument has been laid
35
before, and approved by a resolution of, the House of Commons.”
16    (1)
Section 35 (relevant minors) is amended as follows.
      (2)
For subsection (3)(c)(ii) substitute—
“(ii)
if any such income is applied for the benefit of a beneficiary,
it is applied for the benefit of the relevant minor.”
40
      (3)
For subsection (4) substitute—
“(4)
Trusts to which subsection (2) applies are not to be treated as failing
to secure that the conditions in subsection (3) are met by reason only
of—
(a)
the trustees’ having powers that enable them to apply in any
45
tax year otherwise than for the benefit of the relevant minor

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
498

amounts (whether consisting of income or capital, or both)
not exceeding the annual limit,
(b)
the trustees’ having the powers conferred by section 32 of the
Trustee Act 1925 (powers of advancement),
(c)
the trustees’ having those powers but free from, or subject to
5
a less restrictive limitation than, the limitation imposed by
proviso (a) of subsection (1) of that section,
(d)
the trustees’ having the powers conferred by section 33 of the
Trustee Act (Northern Ireland) 1958 (corresponding
provision for Northern Ireland),
10
(e)
the trustees’ having those powers but free from, or subject to
a less restrictive limitation than, the limitation imposed by
subsection (1)(a) of that section, or
(f)
the trustees’ having powers to the like effect as the powers
mentioned in any of paragraphs (b) to (e).
15
(4B)
For the purposes of this section, the “annual limit” for a tax year is
whichever is the lower of the following amounts—
(a)
£3,000, and
(b)
3% of the amount that is the maximum value of the settled
property during the tax year in question.
20
(4C)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (4)(a) is, or is not,
to apply in relation to a trust, and
(b)
amend the definition of “the annual limit” in subsection (4B).
(4D)
An order under subsection (4C) may—
25
(a)
make different provision for different cases, and
(b)
contain transitional and saving provision.
(4E)
A statutory instrument containing an order under subsection (4C)
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
30
17
For section 38 substitute—
“38
Meaning of “disabled person”
In this Chapter “disabled person” has the meaning given by
Schedule 1A.”
18
The amendments made by paragraphs 15 to 17 have effect for the tax year
35
2013-14 and subsequent tax years.
19
After Schedule 1 insert—
“Schedule 1A
Section 38

Meaning of “disabled person”
“Disabled person”
40
1
“Disabled person” means—
(a)
a person who by reason of mental disorder within the
meaning of the Mental Health Act 1983 is incapable of

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
499

administering his or her property or managing his or her
affairs,
(b)
a person in receipt of attendance allowance,
(c)
a person in receipt of a disability living allowance by virtue
of entitlement to the care component at the highest or
5
middle rate,
(d)
a person in receipt of personal independence payment by
virtue of entitlement to the daily living component,
(e)
a person in receipt of an increased disablement pension,
(f)
a person in receipt of constant attendance allowance, or
10
(g)
a person in receipt of armed forces independence
payment.
Attendance allowance
2
A person is to be treated as a disabled person under paragraph
1(b) if he or she satisfies HMRC that he or she would be entitled to
15
receive attendance allowance but for—
(a)
the conditions as to residence and presence prescribed
under section 64(1) of SSCBA 1992 or section 64(1) of
SSCB(NI)A 1992,
(b)
provision made by regulations under section 67(1) or (2) of
20
SSCBA 1992 or section 67(1) or (2) of SSCB(NI)A 1992 (non-
satisfaction of conditions for attendance allowance where
person is undergoing treatment for renal failure in hospital
or is provided with certain accommodation), or
(c)
section 113(1) of SSCBA 1992 or section 113(1) of
25
SSCB(NI)A 1992 or provision made by regulations under
section 113(2) of SSCBA 1992 or section 113(2) of
SSCB(NI)A 1992 (general provisions as to disqualification
and suspension).
Disability living allowance
30
3
A person is to be treated as a disabled person under paragraph 1(c)
if he or she satisfies HMRC that he or she would be entitled to
receive a disability living allowance by virtue of entitlement to the
care component at the highest or middle rate but for—
(a)
the conditions as to residence and presence prescribed
35
under section 71(6) of SSCBA 1992 or section 71(6) of
SSCB(NI)A 1992,
(b)
provision made by regulations under section 72(8) of
SSCBA 1992 or section 72(8) of SSCB(NI)A 1992 (no
payment of disability allowance for persons for whom
40
certain accommodation is provided), or
(c)
section 113(1) of SSCBA 1992 or section 113(1) of
SSCB(NI)A 1992 or provision made by regulations under
section 113(2) of SSCBA 1992 or section 113(2) of
SSCB(NI)A 1992 (general provisions as to disqualification
45
and suspension).

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
500

Personal independence payment
4
A person is to be treated as a disabled person under paragraph
1(d) if he or she satisfies HMRC that he or she would be entitled to
receive personal independence payment by virtue of entitlement
to the daily living component but for—
5
(a)
the conditions as to residence and presence prescribed
under section 77(3) of WRA 2012 or the corresponding
provision having effect in Northern Ireland,
(b)
provision made by regulations under section 85 of WRA
2012 (exclusion of certain care home residents) or the
10
corresponding provision having effect in Northern
Ireland,
(c)
provision made by regulations under section 86 of WRA
2012 (exclusion of certain hospital in-patients) or the
corresponding provision having effect in Northern
15
Ireland, or
(d)
section 87 of WRA 2012 (exclusion of prisoners and
detainees) or the corresponding provision having effect in
Northern Ireland.
Increased disablement pension
20
5
A person is to be treated as a disabled person under paragraph
1(e) if he or she satisfies HMRC that he or she would be entitled to
receive an increased disablement pension but for—
(a)
conditions as to residence and presence that have effect in
relation to increased disablement pension by virtue of
25
regulations under section 104(3) of SSCBA 1992 or section
104(3) of SSCB(NI)A 1992 (application of attendance
allowance provisions),
(b)
provision made under section 67(1) or (2) of SSCBA 1992 or
section 67(1) or (2) of SSCB(NI)A 1992 (non-satisfaction of
30
conditions for attendance allowance where person is
undergoing treatment for renal failure in hospital or is
provided with certain accommodation) that has effect in
relation to increased disablement pension by virtue of such
regulations, or
35
(c)
section 113(1) of SSCBA 1992 or section 113(1) of
SSCB(NI)A 1992 or provision made by regulations under
section 113(2) of SSCBA 1992 or section 113(2) of
SSCB(NI)A 1992 (general provisions as to disqualification
and suspension).
40
Constant attendance allowance
6
A person is to be treated as a disabled person under paragraph 1(f)
if he or she satisfies HMRC that he or she would be entitled to
receive constant attendance allowance but for—
(a)
article 61 (residence outside United Kingdom) or article 64
45
(maintenance in hospital or institution) of the Personal
Injuries (Civilians) Scheme 1983 (S.I. 1983/686), or

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
501

(b)
article 53 (maintenance in hospital or institution) of the
Naval, Military and Air Forces etc. (Disablement and
Death) Service Pensions Order 2006 (S.I. 2006/606).
Armed forces independence payment
7
A person is to be treated as a disabled person under paragraph
5
1(g) if he or she satisfies HMRC that he or she would be entitled to
receive armed forces independence payment but for article 42 of
the Armed Forces and Reserve Forces (Compensation Scheme)
Order 2011 (S.I. 2011/517) (cessation of payment on admission to
Royal Hospital, Chelsea).
10
Interpretation
8
In this Schedule—
“armed forces independence payment” means armed forces
independence payment under a scheme established under
section 1 of the Armed Forces (Pensions and
15
Compensation) Act 2004,
“attendance allowance” means an allowance under section 64
of SSCBA 1992 or section 64 of SSCB(NI)A 1992,
“constant attendance allowance” means an allowance
under—
20
(a)
article 14 of the Personal Injuries (Civilians) Scheme
1983 (S.I. 1983/686), or
(b)
article 8 of the Naval, Military and Air Forces etc.
(Disablement and Death) Service Pensions Order
2006 (S.I. 2006/606),
25
“disability living allowance” means a disability living
allowance under section 71 of SSCBA 1992 or section 71 of
SSCB(NI)A 1992,
“HMRC” means Her Majesty’s Revenue and Customs,
“increased disablement pension” means an increase of
30
disablement pension under—
(a)
section 104 of SSCBA 1992, or
(b)
section 104 of SSCB(NI)A 1992,
“personal independence payment” means personal
independence payment under—
35
(a)
WRA 2012, or
(b)
the corresponding provision having effect in
Northern Ireland,
“SSCBA 1992” means the Social Security Contributions and
Benefits Act 1992,
40
“SSCB(NI)A 1992” means the Social Security Contributions
and Benefits (Northern Ireland) Act 1992,
“WRA 2012” means the Welfare Reform Act 2012.”
Interpretation: relevant settlement
20    (1)
In this Schedule, “relevant settlement” means—
45

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
502

(a)
a settlement created before 8 April 2013 the trusts of which have not
been altered on or after that date, or
(b)
a settlement arising on or after 8 April 2013 under the will of a
testator, if—
(i)
the will was executed before 8 April 2013 and its provisions,
5
so far as relating to the settlement, have not been altered on
or after that date, or
(ii)
the will was executed or confirmed on or after 8 April 2013
and its provisions, so far as relating to the settlement, are in
the same terms as those contained in a will executed by the
10
same testator before that date.
      (2)
In this Schedule a reference to a will includes a reference to a codicil.
Schedule 43
Section 215

Statutory residence test
Part 1
15
The rules
Introduction
1     (1)
This Part of this Schedule sets out the rules for determining for the purposes
of relevant tax whether individuals are resident or not resident in the UK.
      (2)
The rules are referred to collectively as “the statutory residence test”.
20
      (3)
The rules do not apply in determining for the purposes of relevant tax
whether individuals are resident or not resident in England, Wales, Scotland
or Northern Ireland specifically (rather than in the UK as a whole).
      (4)
“Relevant tax” means—
(a)
income tax,
25
(b)
capital gains tax, and
(c)
(so far as the residence status of individuals is relevant to them)
inheritance tax and corporation tax.
      (5)
Key concepts used in the rules are defined in Part 2 of this Schedule.
Interpretation of enactments
30
2     (1)
In enactments relating to relevant tax, a reference to being resident (or not
resident) in the UK is, in the case of individuals, a reference to being resident
(or not resident) in the UK in accordance with the statutory residence test.
      (2)
Sub-paragraph (1) applies even if the reference relates to the tax liability of
an actual or deemed person that is not an individual (for example, where the
35
liability of another person depends on the residence status of an individual).
      (3)
An individual who, in accordance with the statutory residence test, is
resident (or not resident) in the UK “for” a tax year is taken for the purposes

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Schedule 43 — Statutory residence test
Part 1 — The rules
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of any enactment relating to relevant tax to be resident (or not resident) there
at all times in that tax year.
      (4)
But see Part 3 of this Schedule (split year treatment) for cases where the effect
of sub-paragraph (3) is relaxed in certain circumstances.
      (5)
This Schedule has effect subject to any express provision to the contrary in
5
(or falling to be recognised and acknowledged in law by virtue of) any
enactment.
The basic rule
3
An individual (“P”) is resident in the UK for a tax year (“year X”) if—
(a)
the automatic residence test is met for that year, or
10
(b)
the sufficient ties test is met for that year.
4
If neither of those tests is met for that year, P is not resident in the UK for that
year.
The automatic residence test
5
The automatic residence test is met for year X if P meets—
15
(a)
at least one of the automatic UK tests, and
(b)
none of the automatic overseas tests.
The automatic UK tests
6
There are 4 automatic UK tests.
7
The first automatic UK test is that P spends at least 183 days in the UK in year
20
X.
8     (1)
The second automatic UK test is that—
(a)
P has a home in the UK during all or part of year X,
(b)
that home is one where P spends a sufficient amount of time in year
X, and
25
(c)
there is at least one period of 91 (consecutive) days in respect of
which the following conditions are met—
(i)
the 91-day period in question occurs while P has that home,
(ii)
at least 30 days of that 91-day period fall within year X, and
(iii)
throughout that 91-day period, condition A or condition B is
30
met or a combination of those conditions is met.
      (2)
Condition A is that P has no home overseas.
      (3)
Condition B is that—
(a)
P has one or more homes overseas, but
(b)
each of those homes is a home where P spends no more than a
35
permitted amount of time in year X.
      (4)
In relation to a home of P’s in the UK, P “spends a sufficient amount of time”
there in year X if there are at least 30 days in year X when P is present there
on that day for at least some of the time (no matter how short a time).
      (5)
In relation to a home of P’s overseas, P “spends no more than a permitted
40
amount of time” there in year X if there are fewer than 30 days in year X