Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 43 — Statutory residence test
Part 5 — Miscellaneous
567

(b)
paragraph 16 of this Schedule has effect in relation to that year as if—
(i)
in sub-paragraph (1)(b), the words “because P met the third
automatic overseas test for each of those years” were omitted,
and
(ii)
in sub-paragraph (2)(a), the words “because P met the third
5
automatic overseas test for that year” were omitted, and
(c)
paragraph 49 of this Schedule has effect in relation to that year as if
in sub-paragraph (2)(a) for the words from “because” to the end there
were substituted “in circumstances where the taxpayer was working
overseas full-time for the whole of that year.”
10
155   (1)
This paragraph applies if—
(a)
year X or, for Part 3 of this Schedule, the tax year for which an
individual’s liability to tax is being calculated is the tax year 2013-14
or a subsequent tax year, and
(b)
it is necessary to determine under a provision of this Schedule, or a
15
provision inserted by Part 3 of this Schedule, whether a tax year
before the tax year 2013-14 (a “pre-commencement tax year”) was a
split year as respects the individual.
      (2)
The provision is to have effect as if—
(a)
the reference to a split year were to a tax year to which the relevant
20
ESC applied, and
(b)
any reference to the UK part or the overseas part of such a year were
to the part corresponding as far as possible, in accordance with the
terms of the relevant ESC, to the UK part or the overseas part of a
split year.
25
      (3)
Where the provision also refers to cases involving actual or deemed
departure from the UK, the reference is to be read and given effect so far as
possible in accordance with the terms of the relevant ESC.
      (4)
“The relevant ESC” means whichever of the extra-statutory concessions to
which effect is given by Part 3 of this Schedule is relevant in the individual’s
30
case.
156   (1)
Sub-paragraph (2) applies in determining whether the test in paragraph
50(3) is met where the relevant year is the tax year 2013-14.
      (2)
The circumstances of a partner of the taxpayer are to be treated as falling
within Case 6 for the previous tax year if the partner was eligible for split
35
year treatment in relation to that tax year under the relevant ESC on the
grounds that he or she returned to the United Kingdom after a period
working overseas full-time.
      (3)
Where the circumstances of a partner are treated as falling within Case 6
under sub-paragraph (2), the reference in paragraph 50(7)(b) to the UK part
40
of the relevant year as defined for Case 6 is a reference to the part
corresponding, so far as possible, in accordance with the terms of the
relevant ESC, to the UK part of that year.
      (4)
“The relevant ESC” means whichever of the extra-statutory concessions to
which effect is given by Part 3 of this Schedule is relevant in the partner’s
45
case.

Finance Bill
Schedule 43 — Statutory residence test
Part 5 — Miscellaneous
568

157   (1)
This paragraph applies in determining whether the test in paragraph
108(1)(c) is met in relation to a tax year before the tax year 2013-14 (a “pre-
commencement tax year”).
      (2)
Paragraph 110(1) is to have effect as if for paragraph (c) there were
substituted—
5
“(c)
at least 4 out of the 7 tax years immediately preceding the
year of departure was a tax year meeting the following
conditions—
(i)
the individual was resident in the UK for that year,
and
10
(ii)
there was no time in that year when the individual
was Treaty non-resident (see paragraph 110(3)).”
      (3)
Whether an individual was resident in the UK for a pre-commencement tax
year is to be determined in accordance with the rules in force for
determining an individual’s residence for that pre-commencement tax year
15
(and not in accordance with the statutory residence test).
158   (1)
The existing temporary non-resident provisions, as in force immediately
before the day on which this Act is passed, continue to have effect on and
after that day in any case where the year of departure (as defined in Part 4 of
this Schedule) is a tax year before the tax year 2013-14.
20
      (2)
Where those provisions continue to have effect by virtue of sub-paragraph
(1)—
(a)
the question of whether a person is or is not resident in the UK for
the tax year 2013-14 or a subsequent tax year is to be determined for
the purposes of those provisions in accordance with Part 1 of this
25
Schedule, but
(b)
the effect of Part 3 is to be ignored.
      (3)
The existing temporary non-resident provisions are—
(a)
section 10A of TCGA 1992 (chargeable gains),
(b)
section 576A of ITEPA 2003 (income withdrawals under certain
30
foreign pensions),
(c)
section 579CA of that Act (income withdrawals under registered
pension schemes), and
(d)
section 832A of ITTOIA (relevant foreign income charged on
remittance basis).
35
159
Section 13 of FA 2012 (Champions League final 2013) is to be read and given
effect, on and after the day on which this Act is passed, as if section 215 and
this Schedule had not been enacted.

Finance Bill
Schedule 44 — Ordinary residence
Part 1 — Income tax and capital gains tax: remittance basis of taxation
569

Schedule 44
Section 216

Ordinary residence
Part 1
Income tax and capital gains tax: remittance basis of taxation
Remittance basis restricted to non-doms
5
1
Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.
2
In section 809A (overview of Chapter), omit “or are not ordinarily UK
resident”.
3
In section 809B (claim for remittance basis to apply)—
(a)
in subsection (1)(b), omit “or is not ordinarily UK resident in that
10
year”, and
(b)
omit subsection (2).
4
In section 809D (application of remittance basis without claim where
unremitted foreign income and gains under £2,000)—
(a)
in subsection (1)(b), omit “or is not ordinarily UK resident in that
15
year”, and
(b)
in subsection (1A), omit “the individual is not domiciled in the
United Kingdom in that year and”.
5
In section 809E (application of remittance basis without claim: other cases),
in subsection (1)(b), omit “or is not ordinarily UK resident in that year”.
20
Treatment of relevant foreign earnings
6
ITEPA 2003 is amended as follows.
7     (1)
In section 22 (chargeable overseas earnings for year when remittance basis
applies and employee ordinarily UK resident), in subsection (1), for
paragraph (b) substitute—
25
“(b)
the employee does not meet the requirement of section 26A
for that year.”
      (2)
Accordingly—
(a)
in the heading of that section, for “ordinarily UK resident”
substitute “outside section 26”, and
30
(b)
in the italicised heading before that section, for “UK ordinarily resident
employees” substitute “employees outside section 26”.
8
In section 23 (calculation of “chargeable overseas earnings”), in subsection
(2), for paragraph (aa) substitute—
“(aa)
the employee does not meet the requirement of section 26A
35
for that year,”.
9     (1)
In section 26 (foreign earnings for year when remittance basis applies and
employee not ordinarily UK resident), in subsection (1), for “is not ordinarily
UK resident in” substitute “meets the requirement of section 26A for”.
      (2)
Accordingly—
40

Finance Bill
Schedule 44 — Ordinary residence
Part 1 — Income tax and capital gains tax: remittance basis of taxation
570

(a)
in the heading of that section, for “not ordinarily UK resident”
substitute “meets section 26A requirement”, and
(b)
in the italicised heading before that section, for “not UK ordinarily
resident” substitute “who meet section 26A requirement”.
10
After that section insert—
5
“26A
Section 26: requirement for 3-year period of non-residence
(1)
An employee meets the requirement of this section for a tax year if
the employee was—
(a)
non-UK resident for the previous 3 tax years, or
(b)
UK resident for the previous tax year but non-UK resident for
10
the 3 tax years before that, or
(c)
UK resident for the previous 2 tax years but non-UK resident
for the 3 tax years before that, or
(d)
non-UK resident for the previous tax year, UK resident for
the tax year before that and non-UK resident for the 3 tax
15
years before that.
(2)
The residence status of the employee before the 3 years of non-UK
residence is not relevant for these purposes.”
11    (1)
Section 41C (foreign securities income) is amended as follows.
      (2)
In subsection (4), for paragraph (b) substitute—
20
“(b)
the individual does not meet the requirement of section 26A
for the year (reading references there to the employee as
references to the individual),”.
      (3)
In subsection (6), for paragraph (b) substitute—
“(b)
the individual meets the requirement of section 26A for the
25
year (reading references there to the employee as references
to the individual), and”.
12
In section 271 (limited exemption of removal benefits and expenses:
general), in subsection (2)—
(a)
in paragraph (a), for “ordinarily UK resident” substitute “outside
30
section 26”, and
(b)
in paragraph (b), for “not ordinarily UK resident” substitute “meets
section 26A requirement”.
13    (1)
In section 554Z9 (remittance basis: A is ordinarily UK resident), in
subsection (1), for paragraph (c) substitute—
35
“(c)
A does not meet the requirement of section 26A for the
relevant tax year (reading references there to the employee as
references to A),”.
      (2)
Accordingly, in the heading of that section, for “A is ordinarily UK
resident” substitute “A does not meet section 26A requirement”.
40
14    (1)
In section 554Z10 (remittance basis: A is not ordinarily resident), in
subsection (1), for paragraph (c) substitute—
“(c)
A meets the requirement of section 26A for the relevant tax
year (reading references there to the employee as references
to A).”
45

Finance Bill
Schedule 44 — Ordinary residence
Part 1 — Income tax and capital gains tax: remittance basis of taxation
571

      (2)
Accordingly, in the heading of that section, for “A is not ordinarily
resident” substitute “A meets section 26A requirement”.
15    (1)
Section 690 (employee non-resident etc) is amended as follows.
      (2)
In subsection (1), for paragraph (a) substitute—
“(a)
is either non-UK resident for the tax year or is UK resident
5
but meets the requirement of section 26A for the tax year,
and”.
      (3)
In subsection (2A), for “but not ordinarily resident in a tax year” substitute
“for a tax year but not domiciled in the United Kingdom in that tax year”.
Consequential amendments
10
16
In section 266A of ICTA (life assurance premiums paid by employer), in
subsection (8)—
(a)
in paragraph (a), for “employee resident and ordinarily resident, but
not domiciled, in UK” substitute “remittance basis applies and
employee outside section 26”, and
15
(b)
in paragraph (b), for “employee resident, but not ordinarily resident,
in UK” substitute “remittance basis applies and employee meets
section 26A requirement”.
17
In section 12 of TCGA 1992 (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—
20
“(1)
This section applies to foreign chargeable gains accruing to an
individual in a tax year (“the foreign chargeable gains”) if section
809B, 809D or 809E of ITA 2007 (remittance basis) applies to the
individual for that year.”
18
In section 87B of that Act (section 87: remittance basis), in subsection (1)—
25
(a)
insert “and” at the end of paragraph (a),
(b)
omit “and” at the end of paragraph (b), and
(c)
omit paragraph (c).
19
In section 726 of ITA 2007 (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—
30
“(1)
This section applies in relation to income treated under section 721 as
arising to an individual in a tax year (“the deemed income”) if section
809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
20
In section 730 of that Act (non-UK domiciled individuals to whom
35
remittance basis applies), for subsection (1) substitute—
“(1)
This section applies in relation to income treated under section 728 as
arising to an individual in a tax year (“the deemed income”) if section
809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
40
21
In section 735 of that Act (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—
“(1)
This section applies in relation to income treated under section 732 as
arising to an individual in a tax year (“the deemed income”) if section

Finance Bill
Schedule 44 — Ordinary residence
Part 1 — Income tax and capital gains tax: remittance basis of taxation
572

809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
22
In section 809F of that Act (effect on what is chargeable), in subsection (4),
for “If the individual is not domiciled in the United Kingdom in that year,
the” substitute “The”.
5
23
In section 809YD of that Act (chargeable gains accruing on sales of exempt
property), in subsection (3), omit “and P is not domiciled in the United
Kingdom in that year”.
24
In section 809Z7 of that Act (meaning of “foreign income and gains” etc)—
(a)
in subsection (2)(d), omit “if the individual is not domiciled in the
10
United Kingdom in that year,”, and
(b)
in subsection (3)(a), for “is ordinarily UK resident in” substitute
“does not meet the requirement of section 26A of ITEPA 2003 for”.
Commencement
25
The amendments made by this Part of this Schedule have effect in relation
15
to an individual’s foreign income and gains for the tax year 2013-14 or any
subsequent tax year.
Savings
26    (1)
This paragraph applies to an individual who—
(a)
was resident in the United Kingdom for the tax year 2012-13, but
20
(b)
was not ordinarily resident there at the end of the tax year 2012-13.
      (2)
Enactments relating to income tax or capital gains tax have effect, in relation
to any eligible foreign income and gains of the individual, as if the
amendments made by this Part of this Schedule had not been made.
      (3)
“Eligible foreign income and gains” means—
25
(a)
if the individual was resident in the United Kingdom for the tax year
2010-11 and the tax year 2011-12, foreign income and gains for the tax
year 2013-14,
(b)
if the individual was not resident in the United Kingdom for the tax
year 2010-11 but was resident in the United Kingdom for the tax year
30
2011-12, foreign income and gains for 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, foreign income and gains for the tax year 2013-14, the
tax year 2014-15 and the tax year 2015-16.
35
      (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
on or after 6 April 2013, the question is to be determined as it would have
been in the absence of this Schedule.
Interpretation
40
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
ITA 2007 (interpretation of remittance basis rules).

Finance Bill
Schedule 44 — Ordinary residence
Part 2 — Income tax: arising basis of taxation
573

Part 2
Income tax: arising basis of taxation
ICTA
28
In section 614 of ICTA (exemptions and reliefs in respect of income from
investments etc of certain pension schemes)—
5
(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”.
ITEPA 2003
10
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—
“(a)
the worker being resident or domiciled outside the
15
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
employment), in subsection (5)—
20
(a)
for paragraph (a) substitute—
“(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”.
25
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
subsection (3), for “resident and ordinarily resident in the United Kingdom”
30
substitute “UK resident”.
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
35
travel), in subsection (6), omit “in which the employee is ordinarily UK
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”.
40
37    (1)
Section 378 (deductions from seafarers’ earnings: eligibility) is amended as
follows.