Finance Bill

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
553

“DTR claim” means a claim for relief under section 6 of that
Act.”
130   (1)
In Chapter 1 of Part 11 (pay as you earn: introduction), section 683 is
amended as follows.
      (2)
After subsection (3) insert—
5
“(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—
“(3B)
“PAYE pension income” for a tax year does not include any taxable
10
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
131
Part 4 of ITTOIA 2005 (savings and investment income) is amended as
follows.
15
132
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
provisions”).
20
(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
(b)
what the following terms mean—
25
(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
year consisting of or including the period of return.
30
(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).
(5)
In this section and in TNR provisions, “double taxation relief
35
arrangements” means arrangements that have effect under section
2(1) of TIOPA 2010.”
133
In Chapter 3 (dividends etc from UK resident companies and tax credits etc

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
554

in respect of certain distributions), after section 401B insert—
“Anti-avoidance
401C
Temporary non-residents
(1)
This section applies if—
(a)
an individual is temporarily non-resident,
5
(b)
a relevant distribution is made or treated as made to the
individual in the temporary period of non-residence,
(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
10
(d)
the amount of income tax charged on the distribution under
this Chapter is less than it would have been if the existence of
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.
15
(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
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.
20
(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
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
25
and assessed without regard to the existence of double taxation relief
arrangements.
(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
30
(b)
it is made or treated as made to the individual because the
individual was at a relevant time—
(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
35
of a cash dividend is not a “relevant distribution” to the extent that
the dividend is paid 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
40
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.
45

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
555

(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.
(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
5
distribution.
(11)
If section 393 applies, references in this section to a distribution being
made to the individual are to a cash dividend being paid over to the
individual.
(12)
In this section—
10
“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;
“relevant time” means—
15
(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
that year;
20
“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).”
134
In Chapter 4 (dividends from non-UK resident companies), after section 408
insert—
25
“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
this Chapter as if they were received by the individual, or as if the
30
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,
(b)
it is a dividend of a company that would be a close company
35
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
(ii)
an associate of a material participator in the company,
40
and
(d)
ignoring this section, the individual—
(i)
is not liable for tax under this Chapter in respect of the
dividend, but

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
556

(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
5
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
10
departure is a split year as respects the individual, the
UK part of that year, or
(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
15
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
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
20
subsection (3) that was remitted to the United Kingdom in the
temporary period of non-residence is to be treated as remitted to the
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.
25
(7)
“Post-departure trade profits” are—
(a)
trade profits of the 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 company arising in an
30
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.
(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.
35
(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
over to the individual or (as the case may be) a dividend being
treated as paid to the individual.
(10)
In this section—
40
“remitted to the United Kingdom” has the meaning given in
Chapter A1 of Part 14 of ITA 2007;
“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
45
company were UK resident.”
135
In Chapter 5 (stock dividends from UK resident companies), after section

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
557

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
5
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
10
(d)
the amount of income tax charged on the relevant stock
dividend income under this Chapter is less than it would
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
15
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
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
20
relevant stock dividend income disregarding any double taxation
relief arrangements.
(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.
25
(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
charged and assessed without regard to the existence of double
taxation relief arrangements.
(6)
Stock dividend income is “relevant stock dividend income” if—
30
(a)
the UK resident company that issues the share capital or
bonus share capital is a close company, and
(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
35
(ii)
an associate of a material participator in the company.
(7)
But stock dividend income within subsection (6) is not “relevant
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—
40
(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
an accounting period that straddles the start of that
45
temporary period as is attributable (on a just and reasonable
basis) to a time after the start of that temporary period.

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
558

(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
5
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
10
interest in the company, as defined in section 457 of that Act;
“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
15
(b)
any time in one or more of the 3 tax years preceding
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).”
20
136
In Chapter 6 (release of loan to participator in close company), after section
420 insert—
“420A
Temporary non-residents
(1)
This section applies if an individual is temporarily non-resident.
(2)
Debts within subsection (3) are to be treated for the purposes of this
25
Chapter as if they had been released or written off in the period of
return.
(3)
A debt is within this subsection if—
(a)
it is the debt, or a part of the debt, in respect of a loan or
advance made by a company to the individual,
30
(b)
it is released or written off in the temporary period of non-
residence, and
(c)
ignoring this section, the individual—
(i)
is not liable for tax under this Chapter in respect of the
release or write-off, but
35
(ii)
would have been so liable, had the release or write-off
taken place in the period of return.
(4)
Subsection (3)(c)(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 fact made.”
40
137
In Chapter 8 of Part 5 of that Act (income not otherwise charged), after
section 689 insert—
“689A
Temporary non-residents
(1)
This section applies if an individual is temporarily non-resident.

Finance Bill
Schedule 43 — Statutory residence test
Part 4 — Anti-avoidance
559

(2)
Distributions within subsection (3) are to be treated for the purposes
of this Chapter as if they had been received by the individual, or as
if the individual had become entitled to them, in the period of return.
(3)
A distribution is within this subsection if—
(a)
the individual receives or becomes entitled to it in the
5
temporary period of non-residence,
(b)
it is a distribution of a company that is a close company or
that would be a close company if the company were UK
resident,
(c)
the individual receives or becomes entitled to the distribution
10
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,
and
(d)
ignoring this section, the individual—
15
(i)
is not liable for tax under this Chapter in respect of the
distribution, but
(ii)
would have been so liable if the individual had
received the distribution, or become entitled to it, in
the period of return.
20
(4)
For the purposes of subsection (3)—
(a)
“associate” and “participator” have the same meanings as in
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,
25
(c)
“relevant time” means—
(i)
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
(ii)
any time in one or more of the 3 tax years preceding
30
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
fact made.
35
(5)
If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies
to the individual for the year of return, any distribution within
subsection (3) that is relevant foreign income and is remitted to the
United Kingdom in the temporary period of non-residence is to be
treated as remitted to the United Kingdom in the period of return.
40
(6)
In this section, “remitted to the United Kingdom” has the meaning
given in Chapter A1 of Part 14 of ITA 2007.”
138
In Chapter 1 of Part 14 of ITA 2007 (limits on liability to income tax of non-
UK residents), after section 812 insert—
“812A
Temporary non-residents
45
(1)
This section applies if—
(a)
an individual is temporarily non-resident,