Finance Bill (HC Bill 47)

(2) A partnership or partners in a partnership may be regarded as a person
or persons distinct from the individuals or other persons who are for
the time being partners.

(3) The trustees of settled property may be regarded as persons distinct
5from the individuals or other persons who are for the time being the
trustees.

(4) Personal representatives may be regarded as persons distinct from the
individuals or other persons who are for the time being personal
representatives.

356OP 10 “Arrangement”

(1) In this Part “arrangement” (except in the phrase “double taxation
arrangements”) includes any agreement, understanding, scheme,
transaction or series of transactions, whether or not legally
enforceable).

(2) 15For the purposes of this Part any number of transactions may be
regarded as constituting a single arrangement if—

(a) a common purpose can be discerned in them, or

(b) there is other sufficient evidence of a common purpose.

356OQ “Disposal”

(1) 20In this Part references to a “disposal” of any property include any case
in which the property is effectively disposed of (whether wholly or in
part, as mentioned in subsection (2))—

(a) by one or more transactions, or

(b) by any arrangement.

(2) 25For the purposes of this Part—

(a) references to a disposal of land or any other property include a
part disposal of the property, and

(b) there is a part disposal of property (“the asset”) where on a
person making a disposal, any form of property derived from
30the asset remains undisposed of (including in cases where an
interest or right in or over the asset is created by the disposal, as
well as where it subsists before the disposal).

356OR “Land” and related expressions

(1) In this Part “land” includes—

(a) 35buildings and structures,

(b) any estate, interest or right in or over land, and

(c) land under the sea or otherwise covered by water.

(2) In this Part references to property deriving its value from land
include—

(a) 40any shareholding in a company deriving its value directly or
indirectly from land,

(b) any partnership interest deriving its value directly or indirectly
from land,

(c) any interest in settled property deriving its value directly or
45indirectly from land, and

(d) any option, consent or embargo affecting the disposition of
land.

356OS References to realising a gain

(1) For the purposes of sections 356OB(1) and 356OD(1) it does not matter
5whether the person (“P”) realising the profit or gain in question realises
it for P or another person.

(2) For the purposes of subsection (1), if, for example by a premature sale,
a person (“A”) directly or indirectly transmits the opportunity of
realising a profit or gain to another person (“B”), A realises B’s profit or
10gain for B.

356OT Related parties

(1) For the purposes of this Part a person (“A”) is related to another person
(“B”)—

(a) throughout any period for which A and B are consolidated for
15accounting purposes,

(b) on any day on which the participation condition is met in
relation to them, or

(c) on any day on which the 25% investment condition is met in
relation to them.

(2) 20A and B are consolidated for accounting purposes for a period if—

(a) their financial results for a period are required to be comprised
in group accounts,

(b) their financial results for the period would be required to be
comprised in group accounts but for the application of an
25exemption, or

(c) their financial results for a period are in fact comprised in group
accounts.

(3) In subsection (2) “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) 30any corresponding provision of the law of a territory outside the
United Kingdom.

(4) The participation condition is met in relation to A and B (“the relevant
parties”) on a day if, within the period of 6 months beginning with that
day—

(a) 35one of the relevant parties directly or indirectly participates in
the management, control or capital of the other, or

(b) the same person or persons directly or indirectly participate in
the management, control or capital of each of the relevant
parties.

(5) 40The 25% investment condition is met in relation to A and B if—

(a) one of them has a 25% investment in the other, or

(b) a third person has a 25% investment in each of them.

(6) Section 259NC of TIOPA 2010 applies for the purposes of determining
whether a person has a “25% investment” in another person for the
45purposes of this section as it applies for the purposes of section
259NB(2) of that Act.

(7) In Chapter 2 of Part 4 of TIOPA 2010, sections 157(2), 158(4), 159(2) and
160(2) (which are about the interpretation of references to direct and
indirect participation) apply in relation to subsection (4) as they apply
in relation to subsection (4) of section 259NA of that Act.””

(2) 5In section 1 of CTA 2010 (overview), in subsection (4), omit paragraph (e).

(3) In section 481 of CTA 2010 (exemption from charges under provisions to which
section 1173 applies), in subsection (2) omit paragraph (a).

(4) In CTA 2010 omit Part 18 (transactions in land).

(5) In section 1173 of CTA 2010 (miscellaneous charges), in Part 2 of the table in
10subsection (2), omit the entry relating to section 818(1) of CTA 2010.

(6) In section 14B of TCGA 1992 (meaning of “non-resident CGT disposal”)—

(a) in subsection (1) for “subsection (5)” substitute “subsections (5) and
(6)”;

(b) after subsection (5) insert—

“(6) 15A disposal of a UK residential property interest is not a non-
resident CGT disposal if section 356OC(1) of CTA 2010 (gains
etc on certain disposals treated as trading profits for
corporation tax purposes) or section 517C of ITA 2007 (gains etc
on certain disposals treated as trading profits for income tax
20purposes) applies in relation to it.””

(7) In section 37 of TCGA 1992 (consideration chargeable to tax on income), in
subsection (5A)(a), for the words from “821(3)” to “not” substitute “356OG(4)
or (6) of CTA 2010 (transactions in land: the chargeable company) applies, an
amount is charged to corporation tax as profits of a person other than”.

(8) 25In section 39 of TCGA 1992 (exclusion of expenditure by reference to tax on
income), in subsection (5)(a), for the words from “821(3)” to “not” substitute
“356OG(4) or (6) of CTA 2010 (transactions in land: the chargeable company)
applies, an amount is charged to corporation tax as profits of a person other
than”.

(9) 30In section 161 of TCGA 1992 (appropriations to and from stock), in subsection
(6), for paragraph (a) substitute—

“(a) any person is charged to corporation tax by virtue of sections
356OB and 356OC of CTA 2010 (certain profits or gains on a
disposal of land treated as trading profits) on the realisation of
35a profit or gain because the condition in section 356OB(7) of that
Act is met, and”.”

(10) In section 188A of TCGA 1992 (election for pooling), in subsection (4), at the
end insert “or section 14B(6) (gains on certain disposals treated as trading
profits)”.

77 40Income tax: territorial scope etc

(1) In section 6 of ITTOIA 2005 (territorial scope of charge to tax)—

(a) after subsection (1) insert—

“(1A) Profits of a trade of dealing in or developing UK land arising to
a non-UK resident are chargeable to tax under this Chapter
45wherever the trade is carried on.”;”

(b) in subsection (2), after “Profits of a trade” insert “other than a trade of
dealing in or developing UK land”.

(2) After section 6 of ITTOIA 2005 insert—

“6A Arrangements for avoiding tax

(1) 5Subsection (3) applies if a person has entered into an arrangement the
main purpose or one of the main purposes of which is to obtain a
relevant tax advantage for the person.

(2) In subsection (1) the reference to obtaining a relevant tax advantage
includes obtaining a relevant tax advantage by virtue of any provisions
10of double taxation arrangements, but only in a case where the relevant
tax advantage is contrary to the object and purpose of the provisions of
the double taxation arrangements (and subsection (3) has effect
accordingly, regardless of anything in section 6(1) of TIOPA 2010).

(3) The relevant tax advantage is to be counteracted by means of
15adjustments.

(4) For this purpose adjustments may be made (whether by an officer of
Revenue and Customs or by the company) by way of an assessment,
the modification of an assessment, amendment or disallowance of a
claim, or otherwise.

(5) 20In this section “relevant tax advantage” means a tax advantage in
relation to income tax to which the company is chargeable (or would
without the tax advantage be chargeable) by virtue of section 6(1A).

(6) In this section “tax advantage” includes—

(a) a relief or increased relief from tax,

(b) 25repayment or increased repayment of tax,

(c) avoidance or reduction of a charge to tax or an assessment to
tax,

(d) avoidance of a possible assessment to tax,

(e) deferral of a payment of tax or advancement of a repayment of
30tax, and

(f) avoidance of an obligation to deduct or account for tax.

(7) In this section—

• “arrangement” (except in the phrase “double taxation
  arrangements”) includes any agreement, understanding,
  35scheme, transaction or series of transactions, whether or not
  legally enforceable;

• “double taxation arrangements” means arrangements which have
  effect under section 2(1) of TIOPA 2010 (double taxation relief
  by agreement with territories outside the United Kingdom).

6B 40Trade of dealing in or developing UK land

(1) A non-UK resident person’s “trade of dealing in or developing UK
land” consists of —

(a) any activities falling within subsection (2) which the person
carries on, and

(b) any activities from which profits arise which are treated under
Part 9A of ITA 2007 as profits of the person’s trade of dealing in
or developing UK land.

(2) The activities within this subsection are—

(a) 5dealing in UK land;

(b) developing UK land for the purpose of disposing of it.

(3) In this section “land” includes—

(a) buildings and structures,

(b) any estate, interest or right in or over land, and

(c) 10land under the sea or otherwise covered by water.

(4) In this section—

• “disposal” is to be interpreted in accordance with section 517R of
  ITA 2007;

• “UK land” means land in the United Kingdom.””

(3) 15In section 3 of ITTOIA 2005 (overview of Part 2), in subsection (4) for “6(2)”
substitute “6(1A), (2)”.

(4) In section 243 of ITTOIA 2005 (post-cessation receipts: extent of charge to tax),
in subsection (4), at the end insert “, other than a person’s trade of dealing in or
developing UK land”.

(5) 20In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts), at the
appropriate place insert—

• “““trade of dealing in or developing UK land”, in relation to a non-
  UK resident person, has the meaning given by section 6B of
  ITTOIA 2005,”.”

78 25Income tax: transactions in UK land

(1) In ITA 2007, after Part 9 insert—

““Part 9A Transactions in UK land

Introduction

517A 30 Overview of Part

This Part contains provision about the income tax treatment of certain
profits and gains realised from disposals concerned with land in the
United Kingdom.

Amounts treated as profits of a trade

517B 35Disposals of land in the United Kingdom

(1) Section 517C(1) applies (subject to subsection (3) of that section) if—

(a) a person within subsection (2)(a), (b) or (c) realises a profit or
gain from a disposal of any land in the United Kingdom, and

(b) any of conditions A to D is met in relation to the land.

(2) The persons referred to in subsection (1) are—

(a) the person acquiring, holding or developing the land,

(b) a person who is associated with the person in paragraph (a) at a
relevant time, and

(c) 5a person who is a party to, or concerned in, an arrangement
within subsection (3).

(3) An arrangement is within this subsection if—

(a) it is effected with respect to all or part of the land, and

(b) it enables a profit or gain to be realised—

(i) 10by any indirect method, or

(ii) by any series of transactions.

(4) Condition A is that the main purpose, or one of the main purposes, of
acquiring the land was to realise a profit or gain from disposing of the
land.

(5) 15Condition B is that the main purpose, or one of the main purposes, of
acquiring any property deriving its value from the land was to realise
a profit or gain from disposing of the land.

(6) Condition C is that the land is held as trading stock.

(7) Condition D is that (in a case where the land has been developed) the
20main purpose, or one of the main purposes, of developing the land was
to realise a profit or gain from disposing of the land when developed.

(8) In this section “relevant time” means any time in the period beginning
when the activities of the project begin and ending 6 months after the
disposal mentioned in subsection (1).

(9) 25In this section “the project” means all activities carried out for any of the
following purposes—

(a) the purposes of dealing in or developing the land, and

(b) any other purposes mentioned in Conditions A to D.

(10) For the purposes of this section a person (“A”) is associated with
30another person (“B”) if—

(a) A is connected with B by virtue of any of subsections (2) to (4)
of section 993 (read in accordance with section 994), or

(b) A is related to B (see section 517U).

517C Disposals of land: profits treated as trading profits

(1) 35The profit or gain is to be treated for income tax purposes as profits of
a trade carried on by the chargeable person.

(2) If the chargeable person is non-UK resident, that trade is the person’s
trade of dealing in or developing UK land (as defined in section 6B of
ITTOIA 2005).

(3) 40But subsection (1) does not apply to a profit or gain so far as it would
(apart from this section) be brought into account as income in
calculating profits (of any person)—

(a) for income tax purposes, or

(b) for corporation tax purposes.

(4) The profits are treated as arising in the tax year in which the profit or
gain is realised.

(5) This section applies in relation to gains which are capital in nature as it
applies in relation to other gains.

517D 5 Disposals of property deriving its value from land in the United
Kingdom

(1) Section 517E(1) applies (subject to subsection (3) of that section) if—

(a) a person realises a profit or gain from a disposal of any property
which (at the time of the disposal) derives at least 50% of its
10value from land in the United Kingdom,

(b) the person is a party to, or concerned in, an arrangement
concerning some or all of the land mentioned in paragraph (a)
(“the project land”), and

(c) the arrangement meets the condition in subsection (2).

(2) 15The condition is that the main purpose, or one of the main purposes, of
the arrangement is to—

(a) deal in or develop the project land, and

(b) realise a profit or gain from a disposal of property deriving the
whole or part of its value from that land.

517E 20Disposals within section 517D: profits treated as trading profits

(1) The relevant amount is to be treated for income tax purposes as profits
of a trade carried on by the chargeable person.

(2) If the chargeable person is non-UK resident, that trade is the chargeable
person’s trade of dealing in or developing UK land.

(3) 25But subsection (1) does not apply to an amount so far as it would (apart
from this section) be brought into account as income in calculating
profits (of any person)—

(a) for income tax purposes, or

(b) for corporation tax purposes.

(4) 30The profits are treated as arising in the tax year in which the profit or
gain is realised.

(5) In this section the “relevant amount” means so much (if any) of the
profit or gain mentioned in section 517D(1) as is attributable, on a just
and reasonable apportionment, to the relevant UK assets.

(6) 35In this section “the relevant UK assets” means any land in the United
Kingdom from which the property mentioned in section 517D(1)
derives any of its value (at the time of the disposal mentioned in that
subsection).

(7) This section applies in relation to gains which are capital in nature as it
40applies in relation to other gains.

517F Profits and losses

(1) Sections 517B to 517E have effect as if they included provision about
losses corresponding to the provision they make about profits and
gains.

(2) Accordingly, in the following sections of this Part references to a “profit
or gain” include a loss.

Person to whom profits attributed

517G The chargeable person

(1) 5For the purposes of sections 517C and 517E the general rule is that the
“chargeable person” is the person (“P”) that realises the profit or gain
(as mentioned in section 517B(1) or 517D(1)).

(2) The general rule in subsection (1) is subject to the special rules in
subsections (4) to (6).

(3) 10But those special rules do not apply in relation to a profit or gain to
which section 517H(3) (fragmented activities) applies.

(4) If all or any part of the profit or gain accruing to P is derived from value
provided directly or indirectly by another person (“B”), B is the
“chargeable person”.

(5) 15Subsection (4) applies whether or not the value is put at the disposal of
P.

(6) If all or any part of the profit or gain accruing to P is derived from an
opportunity of realising a profit or gain provided directly or indirectly
by another person (“D”), D is “the chargeable person” (unless the case
20falls within subsection (4)).

(7) For the meaning of “another person” see section 517P.

Anti-fragmentation

517H Fragmented activities

(1) Subsection (3) applies if—

(a) 25a person (“P”) disposes of any land in the United Kingdom,

(b) any of conditions A to D in section 517B is met in relation to the
land, and

(c) a person (“R”) who is associated with P at a relevant time has
made a relevant contribution to activities falling within
30subsection (2).

(2) The following activities fall within this subsection—

(a) the development of the land,

(b) any other activities directed towards realising a profit or gain
from the disposal of the land.

(3) 35For the purposes of this Part, the profit or gain (if any) realised by P
from the disposal is to be taken to be what that profit or gain would be
if R were not a distinct person from P (and, accordingly, as if everything
done by or in relation to R had been done by or in relation to P).

(4) Subsection (5) applies to any amount which is paid (directly or
40indirectly) by R to P for the purposes of meeting or reimbursing the cost
of income tax which P is liable to pay as a result of the application of
subsection (3) in relation to R and P.

(5) The amount—

(a) is not to be taken into account in calculating profits or losses of
either R or P for the purposes of income tax or corporation tax,
and

(b) 5is not for any purpose of the Corporation Tax Acts to be
regarded as a distribution.

(6) In subsection (1) “relevant time” means any time in the period
beginning when the activities of the project begin and ending 6 months
after the disposal.

(7) 10For the purposes of this section any contribution made by P to activities
falling within subsection (2) is a “relevant contribution” unless the
profit made or to be made by P in respect of the contribution is
insignificant having regard to the size of the project.

(8) In this section “contribution” means any kind of contribution,
15including, for example—

(a) the provision of professional or other services, or

(b) a financial contribution (including the assumption of a risk).

(9) For the purposes of this section R is “associated” with P if—

(a) R is connected with P by virtue of any of subsections (2) to (4) of
20section 993 (read in accordance with section 994), or

(b) R is related to P (see section 517U).

(10) In this section “the project” means all activities carried out for any of the
following purposes—

(a) the purposes of dealing in or developing the land, and

(b) 25any other purposes mentioned in Conditions A to D in section
517B.

Calculation of profit or gain on disposal

517I Calculation of surplus on a disposal of land

For the purposes of this Part, the profit or gain (if any) from a disposal
30of any property is to be calculated according to the principles
applicable for calculating the profits of a trade under Part 2 of ITTOIA
2005, subject to any modifications that may be appropriate (and for this
purpose the same rules are to apply in calculating losses from a
disposal as apply in calculating profits).

517J 35Apportionments

Any apportionment (whether of expenditure, consideration or any
other amount) that is required to be made for the purposes of this Part
is to be made on a just and reasonable basis.

Arrangements for avoiding tax

517K 40Arrangements for avoiding tax

(1) Subsection (3) applies if an arrangement has been entered into the main
purpose or one of the main purposes of which is to enable a person to
obtain a relevant tax advantage.

(2) In subsection (1) the reference to obtaining a relevant tax advantage
includes obtaining a relevant tax advantage by virtue of any provisions
of double taxation arrangements, but only in a case where the relevant
tax advantage is contrary to the object and purpose of the provisions of
5the double taxation arrangements (and subsection (3) has effect
accordingly, regardless of anything in section 6(1) of TIOPA 2010).

(3) The tax advantage is to be counteracted by means of adjustments.

(4) For this purpose adjustments may be made (whether by an officer of
Revenue and Customs or by the company) by way of an assessment,
10the modification of an assessment, amendment or disallowance of a
claim, or otherwise.

(5) In this section “relevant tax advantage” means an advantage in relation
to income tax charged (or which would, if the tax advantage were not
obtained, be charged) in respect of amounts treated as profits of a trade
15by virtue of this Part.

(6) In this section “advantage” includes—

(a) a relief or increased relief from tax,

(b) repayment or increased repayment of tax,

(c) avoidance or reduction of a charge to tax or an assessment to
20tax,

(d) avoidance of a possible assessment to tax,

(e) deferral of a payment of tax or advancement of a repayment of
tax, and

(f) avoidance of an obligation to deduct or account for tax.

25Exemptions

517L Gain attributable to period before intention to develop formed

(1) Subsection (2) applies if—

(a) subsection (1) of section 517C applies because Condition D in
section 517B is met (land developed with purpose of realising a
30gain from its disposal when developed), and

(b) part of the profit or gain mentioned in that subsection is fairly
attributable to a period before the intention to develop was
formed.

(2) Section 517C(1) has effect as if the person mentioned in section 517B(1)
35had not realised that part of the profit or gain.

(3) Subsection (4) applies if—

(a) section 517E(1) applies, and

(b) part of the profit or gain mentioned in section 517E(5) is fairly
attributable to a period before the person mentioned in section
40517D(1) was a party to, or concerned in, the arrangement in
question.

(4) Section 517E has effect as if the person had not realised that part of the
profit or gain.