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

525

 

The overseas part

53    (1)  

“The overseas part” of a split year is the part of that year defined below—

(a)   

for the Case in question, or

(b)   

if the taxpayer’s circumstances fall within more than one Case, for

the Case which has priority (see paragraphs 54 and 55).

5

      (2)  

For Case 1, the overseas part is—

(a)   

if there is only one period falling within paragraph 44(3), the part

beginning with the first day of that period, and

(b)   

if there is more than one such period, the part beginning with the first

day of the longest of those periods.

10

      (3)  

For Case 2, the overseas part is the part beginning with the deemed

departure day as defined in paragraph 45(7) and (8).

      (4)  

For Case 3, the overseas part is the part beginning with the day mentioned

in paragraph 46(3)(a).

      (5)  

For Case 4, the overseas part is the part before the day mentioned in

15

paragraph 47(3).

      (6)  

For Case 5, the overseas part is—

(a)   

if there is only one period falling within paragraph 48(3), the part

before that period begins, and

(b)   

if there is more than one such period, the part before the first of those

20

periods begins.

      (7)  

For Case 6, the overseas part is—

(a)   

if there is only one period falling within paragraph 49(3), the part

ending with the last day of that period, and

(b)   

if there is more than one such period, the part ending with the last

25

day of the longest of those periods.

      (8)  

For Case 7, the overseas part is the part before the deemed arrival day as

defined in paragraph 50(7) and (8).

      (9)  

For Case 8, the overseas part is the part before the day mentioned in

paragraph 51(3)(a).

30

Priority between Cases 1 to 3

54    (1)  

This paragraph applies to determine which Case has priority where the

taxpayer’s circumstances for the relevant year fall within two or all of the

following—

Case 1 (starting full-time work overseas);

35

Case 2 (the partner of someone starting full-time work overseas);

Case 3 (ceasing to have a home in the UK).

      (2)  

Case 1 has priority over Case 2 and Case 3.

      (3)  

Case 2 has priority over Case 3.

 
 

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

526

 

Priority between Cases 4 to 8

55    (1)  

This paragraph applies to determine which Case has priority where the

taxpayer’s circumstances for the relevant year fall within two or more of the

following—

Case 4 (starting to have a home in the UK only);

5

Case 5 (starting full-time work in the UK);

Case 6 (ceasing full-time work overseas);

Case 7 (the partner of someone ceasing full-time work overseas);

Case 8 (starting to have a home in the UK).

      (2)  

In this paragraph “the split year date” in relation to a Case means the final

10

day of the part of the relevant year defined in paragraph 53(5) to (9) for that

Case.

      (3)  

If Case 6 applies—

(a)   

if Case 5 also applies and the split year date in relation to Case 5 is

earlier than the split year date in relation to Case 6, Case 5 has

15

priority;

(b)   

otherwise, Case 6 has priority.

      (4)  

If Case 7 (but not Case 6) applies—

(a)   

if Case 5 also applies and the split year date in relation to Case 5 is

earlier than the split year date in relation to Case 7, Case 5 has

20

priority;

(b)   

otherwise, Case 7 has priority

      (5)  

If two or all of Cases 4, 5 and 8 apply (but neither Case 6 nor Case 7), the Case

which has priority is the one with the earliest split year date.

      (6)  

But if, in a case to which sub-paragraph (5) applies, two or all of the Cases

25

which apply share the same split year date and that date is the only, or

earlier, split year date of the Cases which apply, the Cases with that split

year date are to be treated as having priority.

The UK part

56         

“The UK part” of a split year is the part of that year that is not the overseas

30

part.

Special charging rules for employment income

57         

ITEPA 2003 is amended as follows.

58    (1)  

In section 15 (earnings for year when employee UK resident), for subsection

(1) substitute—

35

“(1)   

This section applies to general earnings for a tax year for which the

employee is UK resident except that, in the case of a split year, it does

not apply to any part of those earnings that is excluded.

(1A)   

General earnings are “excluded” if they—

(a)   

are attributable to the overseas part of the split year, and

40

(b)   

are neither—

(i)   

general earnings in respect of duties performed in the

United Kingdom, nor

 
 

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

527

 

(ii)   

general earnings from overseas Crown employment

subject to United Kingdom tax.”

      (2)  

After subsection (3) insert—

“(4)   

Any attribution required for the purposes of subsection (1A)(a) is to

be done on a just and reasonable basis.

5

(5)   

The following provisions of Chapter 5 of this Part apply for the

purposes of subsection (1A)(b) as for the purposes of section 27(2)—

(a)   

section 28 (which defines “general earnings from overseas

Crown employment subject to United Kingdom tax”), and

(b)   

sections 38 to 41 (which contain rules for determining the

10

place of performance of duties of employment).

(6)   

Subject to any provision made in an order under section 28(5) for the

purposes of subsection (1A)(b), provisions made in an order under

that section for the purposes of section 27(2) apply for the purposes

of subsection (1A)(b) too.”

15

59         

In section 22 (chargeable overseas earnings for year when remittance basis

applies and employee outside section 26), for subsection (7) substitute—

“(7)   

Section 15(1) does not apply to general earnings within subsection

(1).”

60    (1)  

Section 23 (calculation of “chargeable overseas earnings”) is amended as

20

follows.

      (2)  

In subsection (3), for step 1 substitute—

Step 1

Identify—

(a)   

in the case of a tax year that is not a split year, the full

25

amount of the overseas earnings for that year, and

(b)   

in the case of a split year, so much of the full amount

of the overseas earnings for that year as is attributable

to the UK part of the year.”

      (3)  

In that subsection, in step 2, for “those earnings” substitute “the earnings

30

identified under step 1”.

      (4)  

After that subsection insert—

“(4)   

Any attribution required for the purposes of step 1 or step 2 in

subsection (3) is to be done on a just and reasonable basis.”

61    (1)  

Section 24 (limit on chargeable overseas earnings where duties of associated

35

employment performed in UK) is amended as follows.

      (2)  

After subsection (2) insert—

“(2A)   

If the tax year is a split year as respects the employee, subsection (2)

has effect as if for “the aggregate earnings for that year from all the

employments concerned” there were substituted “so much of the

40

aggregate earnings for that year from all the employments concerned

as is attributable to the UK part of that year”.”

 
 

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

528

 

      (3)  

After subsection (3) insert—

“(3A)   

Any attribution required for the purposes of subsection (2A) is to be

done on a just and reasonable basis.”

62    (1)  

Section 26 (foreign earnings for year when remittance basis applies and

employee meets section 26A requirement) is amended as follows.

5

      (2)  

In subsection (1), for the words from “if the general earnings” to the end

substitute “if the general earnings meet all of the following conditions—

(a)   

they are neither—

(i)   

general earnings in respect of duties performed in the

United Kingdom, nor

10

(ii)   

general earnings from overseas Crown employment

subject to United Kingdom tax, and

(b)   

if the tax year is a split year as respects the employee, they are

attributable to the UK part of the year.”

      (3)  

After subsection (5) insert—

15

“(5A)   

Any attribution required for the purposes of subsection (1)(b) is to be

done on a just and reasonable basis.”

      (4)  

For subsection (6) substitute—

“(6)   

Section 15(1) does not apply to general earnings within subsection

(1).”

20

63         

In section 232 (giving effect to mileage allowance relief), after subsection (6)

insert—

“(6A)   

If the earnings from which a deduction allowed under this section is

deductible include earnings that are “excluded” within the meaning

of section 15(1A)—

25

(a)   

the amount of the deduction allowed is a proportion of the

amount that would be allowed under this section if the tax

year were not a split year, and

(b)   

that proportion is equal to the proportion that the part of the

earnings that is not “excluded” bears to the total earnings.”

30

64    (1)  

Section 329 (deduction from earnings not to exceed earnings) is amended as

follows.

      (2)  

After subsection (1) insert—

“(1A)   

If the earnings from which a deduction allowed under this Part is

deductible include earnings that are “excluded” within the meaning

35

of section 15(1A)—

(a)   

the amount of the deduction allowed is a proportion of the

amount that would be allowed under this Part if the tax year

were not a split year, and

(b)   

that proportion is equal to the proportion that the part of the

40

earnings that is not “excluded” bears to the total earnings.”

      (3)  

In subsection (2), after “those earnings” insert “(or, in a case within

subsection (1A), the part of those earnings that is not “excluded”)”.

 
 

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

529

 

      (4)  

In subsection (3), after “the earnings” insert “(or, in a case within subsection

(1A), the part of the earnings that is not “excluded”)”.

65    (1)  

Section 394 (charge on employer-financed retirement benefits) is amended

as follows.

      (2)  

In subsection (4C), omit “or” at the end of paragraph (b) and after that

5

paragraph insert—

“(ba)   

an amount which would count as employment income of the

employee or former employee under that Chapter but for the

application of section 554Z5 (overlap with earlier relevant

step), or”.

10

      (3)  

In that subsection, for paragraph (c) substitute—

“(c)   

an amount which would be within paragraph (a), (b) or (ba)

apart from—

(i)   

the employee or former employee having been non-

UK resident for any tax year, or

15

(ii)   

any tax year having been a split year as respects the

employee or former employee.”

66    (1)  

Section 421E (income relating to securities: exclusions about residence etc) is

amended as follows.

      (2)  

For subsection (1) substitute—

20

“(1)   

Chapters 2, 3 and 4 do not apply in relation to employment-related

securities if the acquisition occurs in a tax year that is not a split year

as respects the employee and—

(a)   

the earnings from the employment for that tax year are not

general earnings to which section 15, 22 or 26 applies

25

(earnings for year when employee UK resident), or

(b)   

had there been any earnings from the employment for that

tax year, they would not have been general earnings to which

any of those sections applied.

(1A)   

Chapters 2, 3 and 4 do not apply in relation to employment-related

30

securities if the acquisition occurs in the UK part of a tax year that is

a split year as respects the employee and—

(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, or

35

(b)   

had there been any earnings from the employment

attributable to that part of the year, they would not have been

general earnings to which any of those sections applied.

(1B)   

Chapters 2, 3 and 4 do not apply in relation to employment-related

securities if the acquisition occurs in the overseas part of a tax year

40

that is a split year as respects the employee.”

      (3)  

After subsection (2) insert—

“(2A)   

But Chapters 3A to 3D do apply in relation to employment-related

securities in relation to which they are disapplied by subsection (2)

if—

45

(a)   

the acquisition takes place in the overseas part of a tax year

that is a split year as respects the employee,

 
 

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

530

 

(b)   

the tax year is a split year because the circumstances of the

case fall within Case 1, Case 2 or Case 3 as described in Part 3

of Schedule 43 to FA 2013 (split year treatment: cases

involving actual or deemed departure from the United

Kingdom), and

5

(c)   

had it not been a split year—

(i)   

the earnings from the employment for that tax year

(or some of them) would have been general earnings

to which section 15, 22 or 26 applied, or

(ii)   

if there had been any earnings from the employment

10

for that tax year, they (or some of them) would have

been general earnings to which any of those sections

applied.”

67         

In section 474 (cases where Chapter 5 of Part 7 does not apply), for

subsection (1) substitute—

15

“(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—

(a)   

the earnings from the employment are not general earnings

20

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

sections applied.

25

(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—

(a)   

the earnings from the employment attributable to that part of

30

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

general earnings to which any of those sections applied.

35

(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.”

68    (1)  

Section 554Z4 (residence issues) is amended as follows.

40

      (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

(b)   

a tax year that is a split year as respects A.

45

(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

 
 

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

531

 

(b)   

in a case within subsection (3)(b), by so much of the value, or

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—

5

(a)   

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

(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,

   

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

      (3)  

After subsection (5) insert—

10

“(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.”

69         

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

15

respects A, are not “excluded” by virtue of section 15(1A)(a) and (b)(i))”.

70         

In section 554Z9 (remittance basis: A is ordinarily UK resident), in

subsection (5)—

(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

20

year as respects A)”, and

(b)   

in paragraph (c), after “tax year” insert “(or the UK part of it)”.

71    (1)  

Section 554Z10 (remittance basis: A is not ordinarily resident) is amended as

follows.

      (2)  

In subsection (1), for paragraph (a) substitute—

25

“(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,”.

      (3)  

For subsection (2) substitute—

“(2)   

The overseas portion of (as the case may be)—

30

(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,

   

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

is remitted to the United Kingdom in that year.”

35

      (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

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

duties.

40

(2B)   

“UK duties” means duties performed in the United Kingdom.”

      (5)  

In subsection (3), for “this purpose” substitute “the purposes of this section”.

 
 

 
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