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Finance Bill


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

532

 

      (6)  

For subsection (4) substitute—

“(4)   

The extent to which—

(a)   

the employment income, or the relevant part of it, is not in

respect of UK duties, or

(b)   

so much of the employment income, or of the relevant part of

5

it, as is attributable to the UK part of the relevant tax year is

not in respect of UK duties,

   

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

Special charging rules for pension income

72    (1)  

Section 575 of ITEPA 2003 (foreign pensions: taxable pension income) is

10

amended as follows.

      (2)  

In subsection (1), after “subsections” insert “(1A),”.

      (3)  

After that subsection insert—

“(1A)   

If the person liable for the tax under this Part is an individual and the

tax year is a split year as respects that individual, the taxable pension

15

income for the tax year is the full amount of the pension income

arising in the UK part of the year, subject to subsections (2) and (3)

and section 576A.”

      (4)  

In subsection (2), after “tax year” insert “or, as the case may be, the UK part

of the tax year”.

20

PAYE income

73    (1)  

Section 690 of ITEPA 2003 (employee non-residents etc) is amended as

follows.

      (2)  

In subsection (1), omit “only”.

      (3)  

After that subsection insert—

25

“(1A)   

This section also applies in relation to an employee in a tax year if it

appears to an officer of Revenue and Customs that—

(a)   

the tax year is likely to be a split year as respects the

employee, and

(b)   

the employee works or will work in the United Kingdom and

30

also works or is likely to work outside the United Kingdom.”

Special charging rules for trading income

74         

ITTOIA 2005 is amended as follows.

75         

In section 6 (territorial scope of charge to tax), after subsection (2) insert—

“(2A)   

If the tax year is a split year as respects a UK resident individual, this

35

section has effect as if, for the overseas part of that year, the

individual were non-UK resident.”

76    (1)  

Section 17 (effect of becoming or ceasing to be UK resident) is amended as

follows.

 
 

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

533

 

      (2)  

For subsection (1) substitute—

“(1)   

This section applies if—

(a)   

an individual carries on a trade otherwise than in

partnership, and

(b)   

there is a change of residence.

5

(1A)   

For the purposes of this section there is a “change of residence” if—

(a)   

the individual becomes or ceases to be UK resident, or

(b)   

a tax year is, as respects the individual, a split year.

(1B)   

The change of residence occurs—

(a)   

in a case falling within subsection (1A)(a), at the start of the

10

tax year for which the individual becomes or ceases to be UK

resident, and

(b)   

in a case falling within subsection (1A)(b), at the start of

whichever of the UK part or the overseas part of the tax year

is the later part.”

15

      (3)  

In subsection (2), at the beginning insert “If this section applies and the

individual does not actually cease permanently to carry on the trade

immediately before the change of residence occurs,”.

77         

In section 243 (post-cessation receipts: extent of charge to tax), after

subsection (5) insert—

20

“(6)   

If the tax year is a split year as respects a UK resident individual, this

section has effect as if, for the overseas part of that year, the

individual were non-UK resident.”

78         

In section 849 (calculation of firm’s profits or losses), after subsection (3)

insert—

25

“(3A)   

For any tax year that is a split year as respects the partner, this section

has effect as if the partner were non-UK resident in the overseas part

of the year.”

79    (1)  

Section 852 (carrying on by partner of notional trade) is amended as follows.

      (2)  

For subsection (6) substitute—

30

“(6)   

If there is a change of residence, the partner is treated as permanently

ceasing to carry on one notional trade when that change of residence

occurs and starting to carry on another immediately afterwards.”

      (3)  

After subsection (7) insert—

“(8)   

Subsections (1A) and (1B) of section 17 apply for the purposes of

35

subsection (6).”

80    (1)  

Section 854 (carrying on by partner of notional business) is amended as

follows.

      (2)  

For subsection (5) substitute—

“(5)   

If there is a change of residence, the partner is treated as permanently

40

ceasing to carry on one notional business when that change of

residence occurs and starting to carry on another immediately

afterwards.”

 
 

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

534

 

      (3)  

After that subsection insert—

“(5A)   

Subsections (1A) and (1B) of section 17 apply for the purposes of

subsection (5).”

Special charging rules for property income

81         

In section 270 of ITTOIA 2005 (profits of property businesses: income

5

charged), after subsection (2) insert—

“(3)   

If, as respects an individual carrying on an overseas property

business, the tax year is a split year—

(a)   

tax is charged under this Chapter on so much of the profits

referred to in subsection (1) as arise in the UK part of the tax

10

year, and

(b)   

the portion of the profits arising in the overseas part of the tax

year is, accordingly, not chargeable to tax under this Chapter.

(4)   

In determining how much of the profits arise in the UK part of the tax

year—

15

(a)   

determine first how much of the non-CAA profits arise in the

UK part by apportioning the non-CAA profits between the

UK part and the overseas part on a just and reasonable basis,

and

(b)   

then adjust the portion of the non-CAA profits arising in the

20

UK part by deducting any CAA allowances for the year and

adding any CAA charges for the year.

(5)   

In subsection (4)—

“CAA allowances” means allowances treated under section 250

or 250A of CAA 2001 (capital allowances for overseas

25

property businesses) as an expense of the business;

“CAA charges” means charges treated under either of those

sections as a receipt of the business;

“non-CAA profits” means profits before account is taken of any

CAA allowances or CAA charges.”

30

Special charging rules for savings and investment income

82         

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

follows.

83         

In section 368 (territorial scope of charges in respect of savings and

investment income), after subsection (2) insert—

35

“(2A)   

If income arising to an individual who is UK resident arises in the

overseas part of a split year, it is to be treated for the purposes of this

section as arising to a non-UK resident.”

84         

In section 465 (person liable for tax on gains from life insurance etc:

individuals), after subsection (1) insert—

40

“(1A)   

But if the tax year is a split year as respects the individual, the

individual is not liable for tax under this Chapter in respect of gains

arising in the overseas part of that year (subject to section 465B).”

85         

In section 467 (person liable: UK resident trustees), in subsection (4), after

 
 

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

535

 

paragraph (a) insert—

“(aa)   

is UK resident but the gain arises in the overseas part of a tax

year that is, as respects the person who created the trusts, a

split year,”.

86    (1)  

Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK

5

resident policy holders) is amended as follows.

      (2)  

The amendments made by sub-paragraphs (3) to (6) apply to section 528 as

substituted by paragraph 3 of Schedule 8 to this Act, and have effect in

relation to policies and contracts in relation to which that section as so

substituted has effect.

10

      (3)  

In subsection (1)(b), for the words from “on which” to the end substitute

“that are foreign days”.

      (4)  

After subsection (1) insert—

“(1A)   

“Foreign days” are—

(a)   

days falling within any tax year for which the individual is

15

not UK resident, and

(b)   

days falling within the overseas part of any tax year that is a

split year as respects the individual.”

      (5)  

In subsection (3), in the definition of “A”, for “days falling within subsection

(1)(b)” substitute “foreign days”.

20

      (6)  

In subsection (8), for “subsection (1)(b)” substitute “subsection (1A)(a) and

(b)”.

      (7)  

The amendments made by sub-paragraphs (8) to (10) apply to section 528 as

in force immediately before the substitution mentioned in sub-paragraph (2)

so far as that section as so in force continues to have effect after the

25

substitution.

      (8)  

In subsection (1), for the words from “the policy holder” to the end substitute

“there are one or more days in the policy period that are foreign days.”

      (9)  

After that subsection insert—

“(1A)   

“Foreign days” are—

30

(a)   

days on which the policy holder is not UK resident, and

(b)   

days falling within the overseas part of any tax year that is a

split year as respects the policy holder (if the policy holder is

an individual).”

     (10)  

In subsection (3), in the definition of “A”, for the words from “on which” to

35

the end substitute “in the policy period that are foreign days, and”.

87    (1)  

Section 528A (reduction in amount charged on basis of non-UK residence of

deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is

amended as follows.

      (2)  

In subsection (1)(b), for the words from “on which” to the end substitute

40

“that were foreign days”.

      (3)  

In subsection (2)—

(a)   

in paragraph (b), for the words from “on which” to the end substitute

“that were foreign days, and”, and

 
 

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

536

 

(b)   

for paragraph (c), substitute—

“(c)   

the deceased died—

(i)   

in a tax year for which the deceased was UK

resident but not one that was a split year as

respects the deceased, or

5

(ii)   

in the UK part of a tax year that was a split

year as respects the deceased.”

      (4)  

After that subsection insert—

“(2A)   

“Foreign days” are—

(a)   

days falling within any tax year for which the deceased was

10

not UK resident, and

(b)   

days falling within the overseas part of any tax year that was

a split year as respects the deceased.”

      (5)  

In subsection (4), in the definition of “A”, for the words from “are days

falling” to the end substitute “were foreign days, and”.

15

      (6)  

In subsection (8), for “subsection (1)(b) or (2)(b)” substitute “subsection

(2A)(a) and (b)”.

88    (1)  

Section 536 (top slicing relieved liability: one chargeable event) is amended

as follows.

      (2)  

The amendment made by sub-paragraph (3) applies to section 536 as

20

amended by paragraph 5 of Schedule 8 to this Act, and has effect in

accordance with paragraph 7 of that Schedule.

      (3)  

For subsection (7) substitute—

“(7)   

If in the case of the individual the gain is reduced under section 528—

(a)   

divide the number of foreign days in the material interest

25

period (as determined in accordance with that section,

including subsections (7) and (8)) by 365,

(b)   

if the result is not a whole number, round it down to the

nearest whole number, and

(c)   

reduce N, for steps 1 and 3 in subsection (1), by the number

30

found by applying paragraphs (a) and (b).”

      (4)  

The amendment made by sub-paragraph (5) applies to section 536 as in force

immediately before it is amended by paragraph 5 of Schedule 8 to this Act,

so far as that section as so in force continues to have effect after it is so

amended.

35

      (5)  

For subsection (7) substitute—

“(7)   

If the gain is from such a policy—

(a)   

divide the number of foreign days in the policy period (as

defined in section 528) by 365,

(b)   

if the result is not a whole number, round it down to the

40

nearest whole number, and

(c)   

reduce N, for steps 1 and 3 in subsection (1), by the number

found by applying paragraphs (a) and (b).”

 
 

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

537

 

Special charging rules for miscellaneous income

89         

In section 577 (territorial scope of charges in respect of miscellaneous

income), after subsection (2) insert—

“(2A)   

If income arising to an individual who is UK resident arises in the

overseas part of a split year, it is to be treated for the purposes of this

5

section as arising to a non-UK resident.”

Special charging rules for relevant foreign income charged on remittance basis

90         

In section 832 of ITTOIA 2005 (relevant foreign income charged on

remittance basis), for subsection (2) substitute—

“(2)   

For any tax year for which the individual is UK resident, income tax

10

is charged on the full amount of so much (if any) of the relevant

foreign income as is remitted to the United Kingdom—

(a)   

in that year, or

(b)   

in the UK part of that year, if that year is a split year as

respects the individual.”

15

91    (1)  

Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as

follows in consequence of the amendment made by the preceding

paragraph.

      (2)  

In section 726 (non-UK domiciled individuals to whom remittance basis

applies), after subsection (4) insert—

20

“(5)   

In the application of section 832 of ITTOIA 2005 to the foreign

deemed income, subsection (2) of that section has effect with the

omission of paragraph (b).”

      (3)  

In section 730 (non-UK domiciled individuals to whom remittance basis

applies), after subsection (4) insert—

25

“(5)   

In the application of section 832 of ITTOIA 2005 to the foreign

deemed income, subsection (2) of that section has effect with the

omission of paragraph (b).”

      (4)  

In section 735 (non-UK domiciled individuals to whom remittance basis

applies), after subsection (4) insert—

30

“(5)   

In the application of section 832 of ITTOIA 2005 to the foreign

deemed income, subsection (2) of that section has effect with the

omission of paragraph (b).”

Special charging rules for capital gains

92         

TCGA 1992 is amended as follows.

35

93    (1)  

Section 2 (persons and gains chargeable to capital gains tax, and allowable

losses) is amended as follows.

      (2)  

After subsection (1A) (inserted by Schedule 44 to this Act) insert—

“(1B)   

If the year is a split year as respects an individual, the individual is

not chargeable to capital gains tax in respect of any chargeable gains

40

accruing to the individual in the overseas part of that year.

 
 

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

538

 

(1C)   

But subsection (1B)—

(a)   

does not apply to chargeable gains in respect of which the

individual would have been chargeable to capital gains tax

under section 10, had the individual been not resident in the

UK for the year, and

5

(b)   

is without prejudice to section 10A.”

      (3)  

In subsection (2)—

(a)   

after “the year of assessment” insert “or, where subsection (1B)

applies, the UK part of that year”, and

(b)   

in paragraph (a), after “that year of assessment” insert “or that part

10

(as the case may be)”.

94    (1)  

Section 3A (reporting limits) is amended as follows.

      (2)  

In subsection (1)—

(a)   

in paragraph (a), after “year of assessment” insert “or, if that year is

a split year as respects the individual, the UK part of that year”, and

15

(b)   

in paragraph (b), after “in that year” insert “or, as the case may be,

that part of the year”.

      (3)  

In subsection (2), after “year of assessment” insert “(or the UK part of such a

year)”.

95    (1)  

Section 12 (non-UK domiciled individuals to whom remittance basis

20

applies) is amended as follows.

      (2)  

After subsection (2) insert—

“(2A)   

If that tax year is a split year as respects the individual, the

chargeable gains are treated as accruing to the individual in the part

of the year (the overseas part or the UK part) in which the foreign

25

chargeable gains are so remitted.”

      (3)  

In subsection (3), after “that year” insert “or, where applicable, that part of

the year”.

96         

In section 13 (attribution of gains to members of non-resident companies),

after subsection (3) insert—

30

“(3A)   

Subsection (2) does not apply in the case of a participator who is an

individual if—

(a)   

the tax year in which the chargeable gain accrues to the

company is a split year as respects the participator, and

(b)   

the chargeable gain accrues to the company in the overseas

35

part of that year.”

97         

In section 16 (computation of losses), after subsection (3) insert—

“(3A)   

If the person is an individual and the year is a split year as respects

that individual, subsection (3) also applies to a loss accruing to the

individual in the overseas part of that year.”

40

98         

In section 16ZB (individual who has made election under section 16ZA:

foreign chargeable gains remitted in tax year after tax year in which accrue),

in subsection (1)(c), after “tax year” insert “or a part of the applicable tax

year”.

 
 

 
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