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Finance (No. 2) Bill (HC Bill 193)

Finance (No. 2) BillPage 190

14 After section 48 insert—

48A Unascertainable consideration

(1) This section applies where—

(a) a person (“P”) has made a non-resident CGT disposal in
5relation to which there accrued to P an NRCGT gain
chargeable to, or an NRCGT loss allowable for the purposes
of, capital gains tax by virtue of section 14D or 188D (“the
original disposal”),

(b) P acquired a right as the whole or part of the consideration for
10that disposal,

(c) on P’s acquisition of the right, there was no corresponding
disposal of it, and

(d) the right is a right to unascertainable consideration (see
subsections (4) to (6)).

(2) 15If P subsequently receives consideration (“the ascertained
consideration”) representing the whole or part of the consideration
referred to in subsection (1)(d) and condition A in section 14B would
have been met in relation to the original disposal had a gain on that
disposal accrued at the time of the receipt of the ascertained
20consideration—

(a) the ascertained consideration is treated as not accruing on the
disposal of the right,

(b) the costs of P’s acquisition of the right (or, in the case of a part
disposal of the right, those costs so far as referable to the part
25disposed of) are taken to be nil, and

(c) the following steps are taken.

(a)(a)the ascertained consideration is treated as not accruing on the
disposal of the right,

(b) the costs of P’s acquisition of the right (or, in the case of a part
30disposal of the right, those costs so far as referable to the part
disposed of) are taken to be nil, and

(c) the following steps are taken.

Step 1

Any amount by which the ascertained consideration exceeds the
35relevant original consideration is treated as consideration (or further
consideration) accruing on the original disposal.

If the relevant original consideration exceeds the ascertained
consideration, the consideration accruing on the original disposal is
treated as reduced by the amount of the excess.

40Step 2

Compute the difference that the adjustment under step 1 makes to
what (if any) NRCGT gain or loss, ATED-related gain or loss or other
gain or loss accrues on the original disposal (computing this
separately for each type of gain or loss).

45The difference is “positive” if a loss is decreased (to nil or otherwise)
or a gain created or increased.

The difference is “negative” if a gain is reduced (to nil or otherwise)
or a loss created or increased.

Step 3

50Any positive amount computed under step 2 is treated for the
purposes of this Act and the Management Act as a gain (of the type
appropriate to the computation) accruing to P at the time of the
receipt of the ascertained consideration.

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Any negative amount computed under step 2 is treated for the
purposes of this Act and the Management Act as a loss (of the type
appropriate to the computation) accruing to P at the time of the
5receipt of the ascertained consideration.

(3) In step 1 in subsection (2), “the relevant original consideration”
means the consideration accruing on the original disposal, so far as
referable to the right mentioned in subsection (1)(b) (or, in the case of
a part disposal of the right, referable to the part disposed of).

(4) 10A right is a right to unascertainable consideration if, and only if—

(a) it is a right to consideration the amount or value of which is
unascertainable at the time when the right is conferred, and

(b) that amount or value is unascertainable at that time on
account of its being referable, in whole or in part, to matters
15which are uncertain at that time because they have not yet
occurred.

This subsection is subject to subsections (5) and (6).

(5) The amount or value of any consideration is not to be regarded as
being unascertainable by reason only—

(a) 20that the right to receive the whole or any part of the
consideration is postponed or contingent, if the consideration
or, as the case may be, that part of it is, in accordance with
section 48, brought into account in the computation of the
gain accruing to a person on the disposal of an asset, or

(b) 25in a case where the right to receive the whole or any part of
the consideration is postponed and is to be, or may be, to any
extent satisfied by the receipt of property of one description
or property of some other description, that some person has
a right to select the property, or the description of property,
30that is to be received.

(6) A right is not to be taken to be a right to unascertainable
consideration by reason only that either the amount or the value of
the consideration has not been fixed, if—

(a) the amount will be fixed by reference to the value, and the
35value is ascertainable, or

(b) the value will be fixed by reference to the amount, and the
amount is ascertainable.

15 In section 57A (gains and losses on relevant high value disposals), after
subsection (2) insert—

(3) 40Subsection (2) does not apply where Part 4 of Schedule 4ZZB applies
(non-resident CGT disposals which are or involve relevant high
value disposals).

16 In Part 2, after Chapter 5 insert—

CHAPTER 6 Computation of gains and losses: non-resident CGT disposals

57B 45Gains and losses on non-resident CGT disposals

(1) Schedule 4ZZB makes provision about the computation of—

Finance (No. 2) BillPage 192

(a) NRCGT gains or losses, and

(b) other gains or losses,

on non-resident CGT disposals.

(2) For further provision about non-resident CGT disposals and NRCGT
5gains and losses see sections 14B to 14H and 188D and 188E.

17 (1) Section 62 (death: general provisions) is amended as follows.

(2) In subsection (2A), for the words from “are gains” to the end substitute
“are—

(a) gains that are treated as accruing by virtue of section 87 or
1089(2) (read, where appropriate, with section 10A), or

(b) NRCGT gains (see section 57B and Schedule 4ZZB).

(3) After subsection (2A) insert—

(2AA) Where allowable NRCGT losses (see section 57B and Schedule 4ZZB)
are sustained by an individual in the year of assessment in which the
15individual dies, the losses may, so far as they cannot be deducted
from chargeable gains accruing to the individual in that year, be
deducted from any gains such as are mentioned in subsection (2A)(b)
that accrued to the deceased in the 3 years of assessment preceding
the year of assessment in which the death occurs, taking chargeable
20gains accruing in a later year before those accruing in an earlier
year.

18 After section 80 insert—

80A Deemed disposal of UK residential property interest under section 80

(1) Subsection (2) applies if, ignoring subsections (2) to (4)—

(a) 25a gain or loss would accrue to the trustees of a settlement on
a disposal of a UK residential property interest deemed to
have been made by virtue of section 80(2), and

(b) on the assumption that the disposal is a non-resident CGT
disposal, that gain or loss would be a chargeable NRCGT
30gain or an allowable NRCGT loss (see section 57B and
Schedule 4ZZB).

(2) The trustees may elect for subsections (3) and (4) to have effect.

(3) No gain or loss accrues to the trustees on that disposal.

(4) But, on a subsequent disposal of the whole or part of the interest in
35UK land which is the subject of the disposal mentioned in subsection
(1)(a), the whole or a corresponding part of the gain or loss which
would have accrued to the trustees were it not for subsection (3)—

(a) is deemed to accrue to the trustees (in addition to any gain or
loss that actually accrues on that subsequent disposal), and

(b) 40(if that would not otherwise be the case) is to be treated as a
chargeable NRCGT gain or an allowable NRCGT loss
accruing on a non-resident CGT disposal.

(5) In this section, “interest in UK land” has the meaning given by
paragraph 2 of Schedule B1.

19 45In section 86 (attribution of gains to settlors with interest in non-resident or

Finance (No. 2) BillPage 193

dual-resident settlements), after subsection (4) insert—

(4ZA) Where a disposal of any settled property (which would apart from
this subsection meet the condition in subsection (1)(e) with respect to
the tax year) is a non-resident CGT disposal—

(a) 5any chargeable gain or allowable loss accruing on the
disposal, other than an NRCGT gain chargeable to, or an
NRCGT loss allowable for the purposes of, capital gains tax
by virtue of section 14D, is to be treated as if it were a
chargeable gain or (as the case requires) allowable loss falling
10to be taken into account in calculating the amount mentioned
in subsection (1)(e) for the tax year, and

(b) the disposal is otherwise to be disregarded for the purposes
of subsection (1)(e).

20 In section 87 (non-UK resident settlements: attribution of gains to
15beneficiaries), after subsection (5) insert—

(5A) For the purpose of determining the section 2(2) amount for a
settlement for a tax year—

(a) any chargeable gain or allowable loss accruing in that tax
year on a non-resident CGT disposal made (or treated as
20made) by the trustees, other than an NRCGT gain chargeable
to, or an NRCGT loss allowable for the purposes of, capital
gains tax by virtue of section 14D, is to be treated as if it were
a chargeable gain or (as the case requires) allowable loss
falling to be taken into account in calculating the amount
25mentioned in subsection (4)(a), and

(b) such a disposal is otherwise to be disregarded.

21 (1) Section 139 (reconstruction involving transfer of business) is amended as
follows.

(2) In subsection (1A)—

(a) 30in paragraph (a), after “chargeable assets” insert “or NRCGT assets”;

(b) in paragraph (b), after “chargeable assets” insert “or NRCGT assets”.

(3) After subsection (1A) insert—

(1AA) For the purposes of subsection (1A), an asset is an “NRCGT asset” in
relation to a company at any time if—

(a) 35the disposal of the asset by the company at that time would
be a non-resident CGT disposal, and

(b) the company would not be, in relation to that disposal, an
eligible person (as defined in section 14F).

22 After section 159 insert—

159A 40 Non-resident CGT disposals: roll-over relief

(1) Section 152 does not apply in relation to a person who would (apart
from that section) be chargeable to capital gains tax under section
14D or 188D in respect of NRCGT gains accruing on the disposal of
the old assets, unless the new assets are qualifying residential
45property interests immediately after the time they are acquired.

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(2) For the purposes of this section an asset is a “qualifying residential
property interest” at any time if it—

(a) is an interest in UK land, and

(b) consists of or includes a dwelling.

(3) 5In this section—

(a) “dwelling” has the meaning given by paragraph 4 of
Schedule B1;

(b) “interest in UK land” has the meaning given by paragraph 2
of Schedule B1;

(c) 10“the old assets” and “the new assets” have the same meaning
as in section 152;

(d) the reference to disposal of the old assets includes a reference
to disposal of an interest in them;

(e) the reference to acquisition of the new assets includes a
15reference to acquisition of an interest in them or entering into
an unconditional contract for the acquisition of them.

23 (1) Section 165 (relief for gifts of business assets) is amended as follows.

(2) In subsection (1), after “167,” insert “167A,”.

(3) After subsection (7) insert—

(7A) 20Subsections (7B) and (7C) apply in any case where—

(a) the disposal is a non-resident CGT disposal, and

(b) the transferee is resident in the United Kingdom.

(7B) Subsections (4) and (6) have effect in relation to the disposal as if the
references to “chargeable gain” were references to “chargeable
25NRCGT gain”.

(7C) Subsection (7) has effect in relation to the disposal as if the reference
to “the excess referred to in paragraph (b) above” were a reference to
“the chargeable NRCGT gain which, ignoring this section and
section 17(1), would accrue to the transferor on the disposal”.

24 30In section 166 (gifts to non-residents), in subsection (1), for “Section 165(4)”
substitute “Subject to section 167A, section 165(4)”.

25 In section 167 (gifts to foreign-controlled companies), in subsection (1), for
“Section 165(4)” substitute “Subject to section 167A, section 165(4)”.

26 After section 167 insert—

167A 35 Gifts of UK residential property interests to non-residents

(1) This section applies where the disposal in relation to which a claim
could be made under section 165 is a disposal of a UK residential
property interest to a transferee who is not resident in the United
Kingdom and, ignoring section 165—

(a) 40a gain would accrue to the transferor on the disposal, and

(b) on the assumption that the disposal is a non-resident CGT
disposal (whether or not that is the case), that gain would be
a chargeable NRCGT gain (see section 57B and Schedule
4ZZB).

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(2) Section 165(4) has effect in relation to the disposal as if it read—

(4) Where a claim for relief is made under this section in respect
of the disposal, the amount of any chargeable gain which,
apart from this section, would accrue to the transferor on the
5disposal, shall be reduced by an amount equal to the held-
over gain on the disposal.

(3) Where the disposal is a non-resident CGT disposal—

(a) section 165(4), as modified by subsection (2) of this section,
has effect in relation to the disposal as if the reference to
10“chargeable gain” were a reference to “chargeable NRCGT
gain”,

(b) section 165(6) has effect in relation to the disposal as if the
references to “chargeable gain” were references to
“chargeable NRCGT gain”, and

(c) 15section 165(7) has effect in relation to the disposal as if the
reference to “the excess referred to in paragraph (b) above”
were a reference to “the chargeable NRCGT gain which,
ignoring this section and section 17(1), would accrue to the
transferor on the disposal”.

(4) 20Where a claim for relief is made under section 165 in relation to the
disposal mentioned in subsection (1), on a subsequent disposal by
the transferee of the whole or part of the interest in UK land which is
the subject of the disposal mentioned in subsection (1), the whole or
a corresponding part of the held-over gain (see section 165(6))—

(a) 25is deemed to accrue to the transferee (in addition to any gain
or loss that actually accrues on that subsequent disposal), and

(b) (if that would not otherwise be the case) is to be treated as an
NRCGT gain chargeable to capital gains tax by virtue of
section 14D accruing on a non-resident CGT disposal.

(5) 30Where the subsequent disposal mentioned in subsection (4) is (or
proves to be) a chargeable transfer for inheritance tax purposes,
section 165(10) has effect in relation to the disposal as if—

(a) the reference to “the chargeable gain accruing to the
transferee on the disposal of the asset” were a reference to the
35chargeable gain accruing on the disposal as computed apart
from subsection (4), and

(b) the reference in section 165(10)(b) to “the chargeable gain”
were a reference to—

(i) the chargeable gain chargeable to capital gains tax by
40virtue of any provision of this Act accruing on the
disposal, and

(ii) the held-over gain deemed to accrue under
subsection (4).

(6) In this section, “interest in UK land” has the meaning given by
45paragraph 2 of Schedule B1.

27 In section 168 (emigration of donee), in subsection (1), after paragraph (a)
insert—

(aa) the transferee is resident in the United Kingdom at the time
of that disposal; and.

Finance (No. 2) BillPage 196

28 After section 168 insert—

168A Deemed disposal of UK residential property interest under section
168

(1) Subsection (2) applies if, ignoring subsections (2) to (4)—

(a) 5a gain would accrue to a transferee on a disposal of a UK
residential property interest deemed to have been made by
virtue of section 168(1), and

(b) on the assumption that the disposal is a non-resident CGT
disposal, that gain would be an NRCGT gain chargeable to
10capital gains tax by virtue of section 14D (see section 57B and
Schedule 4ZZB).

(2) The transferee may elect for subsections (3) and (4) to have effect.

(3) The held-over gain (within the meaning of section 165 or 260) does
not accrue to the transferee on that disposal.

(4) 15But, on a subsequent disposal of the whole or part of the interest in
UK land which is the subject of the disposal mentioned in subsection
(1)(a), the whole or a corresponding part of the held-over gain which
would have accrued to the transferee were it not for subsection (3)—

(a) is deemed to accrue to the transferee (in addition to any gain
20or loss that actually accrues on that subsequent disposal), and

(b) (if that would not otherwise be the case) is to be treated as an
NRCGT gain chargeable to capital gains tax by virtue of
section 14D accruing on a non-resident CGT disposal.

(5) In this section, “interest in UK land” has the meaning given by
25paragraph 2 of Schedule B1.

29 After section 187A insert—

187B Deemed disposal of UK residential property interest under section 185

(1) This section applies if, ignoring subsections (3) and (4)—

(a) a gain or loss would accrue to a company on a disposal of a
30UK residential property interest deemed to have been made
by virtue of section 185(2), and

(b) on the assumptions in subsection (2), that gain or loss would
be an NRCGT gain chargeable to, or an NRCGT loss
allowable for the purposes of, capital gains tax by virtue of
35section 14D or 188D (see section 57B and Schedule 4ZZB).

(2) The assumptions are that—

(a) the disposal is a non-resident CGT disposal, and

(b) any claim which the company could make under section 14F
is made.

(3) 40No gain or loss accrues to the company on that disposal.

(4) But, on a subsequent disposal of the whole or part of the interest in
UK land which is the subject of the disposal mentioned in subsection
(1)(a), the whole or a corresponding part of the gain or loss which
would have accrued to the company were it not for subsection (3)—

(a) 45is deemed to accrue to the company (in addition to any gain
or loss that actually accrues on that subsequent disposal), and

Finance (No. 2) BillPage 197

(b) (if that would not otherwise be the case) is to be treated as an
NRCGT gain chargeable to, or an NRCGT loss allowable for
the purposes of, capital gains tax by virtue of section 14D
accruing on a non-resident CGT disposal.

(5) 5A company may make an election for subsections (3) and (4) not to
apply in relation to the disposal mentioned in subsection (1)(a).

(6) Such an election must be made within 2 years after the day on which
the company ceases to be resident in the United Kingdom.

(7) In this section, “interest in UK land” has the meaning given by
10paragraph 2 of Schedule B1.

30 Before section 189 (and the italic heading before it), insert—

Pooling of NRCGT gains and losses

188A Election for pooling

(1) A “pooling election” is an election which—

(a) 15specifies the date from which the election is to have effect (the
“effective date” of the election), and

(b) is made by all those members of a group (the “potential
pooling group”) who are qualifying members.

(2) For this purpose the “qualifying members” of a group are all the
20companies which are members of that group and meet the qualifying
conditions on the effective date of the election.

(3) The “qualifying conditions” are met by a company at any time when
it—

(a) is not resident in the United Kingdom,

(b) 25is a closely-held company,

(c) is not a company carrying on life assurance business (as
defined in section 56 of the Finance Act 2012),

(d) does not hold any chargeable residential assets, and

(e) holds an asset the disposal of which would be a disposal of a
30UK residential property interest.

(4) For the purposes of subsection (3), an asset is a “chargeable
residential asset” at any time if a disposal of the asset at that time
would be a non-resident CGT disposal but for section 14B(5) (gains
forming part of chargeable profits for corporation tax purposes by
35virtue of section 10B etc).

(5) The day on which a pooling election is made must not be later than
the 30th day after the day specified as its effective date.

(6) A pooling election is irrevocable.

(7) In this section—

  • 40“closely-held company” is to be interpreted in accordance with
    Part 1 of Schedule C1;

  • “group” is to be interpreted in accordance with section 170.

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188B Meaning of “NRCGT group”

(1) The companies which make a pooling election form an NRCGT
group.

(2) An NRCGT group continues to exist as long as at least one member
5of the NRCGT group continues to be a member of the potential
pooling group and to meet the conditions in paragraphs (a) to (d) of
section 188A(3).

(3) See also section 188F (companies becoming eligible to join NRCGT
group) and section 188G (company ceasing to be a member of an
10NRCGT group).

188C Transfers within an NRCGT group

(1) This section applies where a company (“company A”) makes a non-
resident CGT disposal to another company (“company B”) at a time
when both companies are members of the same NRCGT group.

(2) 15In subsections (3) to (5) “the asset” means the asset which is the
subject of that disposal.

(3) For the relevant purposes (see subsection (4))—

(a) company A’s acquisition of the asset is treated as company
B’s acquisition of the asset,

(b) 20everything done by company A in relation to the asset in the
period of company A’s ownership of the asset is accordingly
treated as done by company B, and

(c) the disposal mentioned in subsection (1) is accordingly
disregarded.

(4) 25The “relevant purposes” means the purposes of—

(a) the determination of whether or not an NRCGT gain or loss
accrues on the disposal mentioned in subsection (1) or any
subsequent disposal of the asset;

(b) the determination of the amount of any such gain or loss;

(c) 30the treatment for capital gains tax purposes of any such gain
or loss.

(5) Accordingly, references in subsection (3) to an acquisition made by,
or anything else done by, company A include anything that
company A is treated as having done as a result of the application of
35this section in relation to an earlier disposal of the asset.

(6) Nothing in this section affects the treatment of the disposal in
question for any other purposes (including the computation of any
gains or losses, other than NRCGT gains or losses, that may accrue
on the disposal).

188D 40Person chargeable to capital gains tax on NRCGT gains accruing to
members of an NRCGT group

(1) The relevant body for a tax year (“year Y”) of an NRCGT group (see
subsection (4)) is chargeable to capital gains tax in respect of
chargeable NRCGT gains accruing to members of the group in the
45tax year on non-resident CGT disposals (and section 14D(1) does not
apply to such gains).

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(2) Capital gains tax is charged on the total amount of chargeable
NRCGT gains accruing in year Y to members of the NRCGT group,
after deducting—

(a) any allowable NRCGT losses accruing in year Y to any
5member of the NRCGT group,

(b) so far as they have not been allowed as a deduction from
chargeable gains accruing in any previous tax year, any
allowable NRCGT losses which in any previous tax year (not
earlier than the tax year 2015-16) accrued to any member of
10the NRCGT group, and

(c) so far as they have not been allowed as a deduction from
chargeable gains accruing in any previous tax year, any
allowable losses (not falling within paragraph (b)) on
disposals of UK residential property interests which in any
15previous tax year (not earlier than the tax year 1965-66)
accrued to any company which is, at any time in year Y, a
member of the NRCGT group.

(3) The only deductions that can be made in calculating the total amount
of chargeable NRCGT gains accruing as mentioned in subsection (2)
20are those permitted by this section.

(4) The “relevant body” of an NRCGT group for a tax year is the body
constituted by all the companies which are members of that NRCGT
group at any time in that tax year.

(5) This Act and the Management Act have effect with any
25modifications that may be necessary in relation to cases where the
relevant body of an NRCGT group is chargeable to capital gains tax
in accordance with this section.

188E Further provision about group losses

(1) Relief is not to be given under this Act more than once in respect of
30a group loss or any part of a group loss.

(2) Relief is not to be given under this Act in respect of a group loss if,
and so far as, relief has been or may be given in respect of it under
the Tax Acts.

(3) No relief is to be given otherwise than in accordance with this section
35for group losses.

(4) In this section “group loss” means an NRCGT loss accruing to a
member of an NRCGT group.

188F Companies becoming eligible to join an NRCGT group

(1) A company which is not a member of an NRCGT group and is
40eligible to become a member of that group may elect to do so.

(2) A company is eligible to become a member of an NRCGT group at
any time when it—

(a) is a member of the potential pooling group, and

(b) meets the qualifying conditions.

45But see subsections (3) and (4).