Finance Bill (HC Bill 47)

(5) In applying this section account must be taken of the treatment under
Part 2 of ITTOIA 2005 (trading income) of a person who appropriates
land as trading stock.

517M Private residences

5No liability to income tax arises under this Part in respect of a gain
accruing to an individual if—

(a) the gain is exempt from capital gains tax as a result of sections
222 to 226 of TCGA 1992 (private residences), or

(b) it would be so exempt but for section 224(3) of that Act
10(residences acquired partly with a view to making a gain).

Other supplementary provisions

517N Tracing value

(1) This section applies if it is necessary to determine the extent to which
the value of any property or right is derived from any other property or
15right for the purposes of this Part.

(2) Value may be traced through any number of companies, partnerships,
trusts and other entities or arrangements.

(3) The property held by a company, partnership or trust must be
attributed to the shareholders, partners, beneficiaries or other
20participants at each stage in whatever way is appropriate in the
circumstances.

(4) In this section—

• “partnership” includes an entity established under the law of a
  country or territory outside the United Kingdom of a similar
  25nature to a partnership; and “partners”, in relation to such
  arrangements, is to be construed accordingly;

• “trust” includes arrangements—

  (a)

  which have effect under the law of a country or territory
  outside the United Kingdom; and

  (b)

  30under which persons acting in a fiduciary capacity hold
  and administer property on behalf of other persons,

  and “beneficiaries”, in relation to such arrangements, is to be
  construed accordingly.

517O Relevance of transactions, arrangements, etc

(1) 35In determining whether section 517C(1) or 517E(1) applies, account is
to be taken of any method, however indirect, by which—

(a) any property or right is transferred or transmitted, or

(b) the value of any property or right is enhanced or diminished.

(2) Accordingly—

(a) 40the occasion of the transfer or transmission of any property or
right, however indirect, and

(b) the occasion when the value of any property or right is
enhanced,

may be an occasion on which section 517C(1) or 517E(1) applies.

(3) Subsections (1) and (2) apply in particular—

(a) to sales, contracts and other transactions made otherwise than
for full consideration or for more than full consideration,

(b) to any method by which any property or right, or the control of
5any property or right, is transferred or transmitted by
assigning—

(i) share capital or other rights in a company,

(ii) rights in a partnership, or

(iii) an interest in settled property,

(c)
10to the creation of an option affecting the disposition of any
property or right and the giving of consideration for granting it,

(d) to the creation of a requirement for consent affecting such a
disposition and the giving of consideration for granting it,

(e) to the creation of an embargo affecting such a disposition and
15the giving of consideration for releasing it, and

(f) to the disposal of any property or right on the winding up,
dissolution or termination of a company, partnership or trust.

Interpretation

517P “Another person”

(1) 20In this Part references to “other” persons are to be interpreted in
accordance with subsections (2) to (4).

(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) 25The trustees of settled property may be regarded as persons distinct
from 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
30representatives.

517Q “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) 35For 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.

517R “Disposal”

(1) 40In 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) For 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
5person making a disposal, any form of property derived from
the 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).

517S “Land” and related expressions

(1) 10In this Part “land” includes—

(a) buildings 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
15include—

(a) any 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) 20any interest in settled property deriving its value directly or
indirectly from land, and

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

517T References to realising a gain

(1) 25For the purposes of sections 517B(1) and 517D(1) it does not matter
whether 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
30realising a profit or gain to another person (“B”), A realises B’s profit or
gain for B.

517U Related parties

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

(a) 35throughout any period for which A and B are consolidated for
accounting 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
40relation to them.

(2) A 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
45comprised in group accounts but for the application of an
exemption, 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) 5any 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) 10one 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) 15The 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
20purposes 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
25in relation to subsection (4) of section 259NA of that Act.””

(2) In section 2 of ITA 2007 (overview of Act)—

(a) after subsection (9) insert—

“(9A) Part 9A is about the treatment of certain transactions in UK
land.”, and”

(b) 30in subsection (13), omit paragraph (c).

(3) In section 482 of ITA 2007 (types of amount to be charged at special rates for
trustees), in the words relating to Type 11, for “Chapter 3 of Part 13 of this Act
(tax avoidance: transactions in land)” substitute “Part 9A of this Act
(transactions in land)”.

(4) 35In section 527 of ITA 2007 (exemption from charges under provisions to which
section 1016 applies), in subsection (2)—

(a) insert “and” at the end of paragraph (d), and

(b) omit paragraph (e).

(5) In Part 13 of ITA 2007, omit Chapter 3 (transactions in land).

(6) 40In section 944 of ITA 2007 (tax avoidance: directions for duty to deduct to
apply), in subsection (1)—

(a) omit paragraph (a), and

(b) in paragraph (b) for “that Part” substitute “Part 13”.

(7) In section 1016 of ITA 2007 (table of provisions to which that section applies),
in Part 2 of the table in subsection (2), omit the entry relating to Chapter 3 of
Part 13 of that Act.

(8) In section 37 of TCGA 1992 (consideration chargeable to tax on income), in
5subsection (5)(a), for the words from “759(4)” to “is” substitute “517G(4) or (6)
of ITA 2007 (transactions in land: the chargeable person) applies, an amount is
charged to income tax as income of”

(9) In section 39 of TCGA 1992 (exclusion of expenditure by reference to tax on
income), in subsection (4)(a), for the words from “759(4)” to “is” substitute
10“517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person)
applies, an amount is charged to income tax as income of”.

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

“(a) any person is charged to income tax by virtue of sections 517B
15and 517C of CTA 2010 (certain profits or gains on a disposal of
land treated as trading profits) on the realisation of a profit or
gain because the condition in section 517B(7) of that Act is met,
and”.”

(11) In section 830 of ITTOIA 2005, in subsection (3), for the words from “of” to the
20end substitute “of—

(a) section 844 (unremittable income: income charged on
withdrawal of relief after source ceases), or

(b) section 517C or 517E of ITA 2007 (profits on certain disposals
concerned with land in the United Kingdom treated as trading
25profits).””

79 Pre-trading expenses

(1) Subsection (2) has effect if—

(a) a particular time (“T”) is the time when a company (“C”) is first within
the charge to corporation tax by virtue of subsection (2)(a) of section 5
30of CTA 2009 (territorial scope of charge),

(b) immediately before time T, C was within the charge to corporation tax
as a result of carrying on the relevant trade in the United Kingdom
through a permanent establishment in the United Kingdom, and

(c) expenses which the company has incurred for the purposes of the trade
35meet the conditions in subsection (3) and (4).

“The relevant trade” means the trade of dealing in or developing UK land
mentioned in subsection (2)(a) of section 5 of CTA 2009.

(2) Section 61 of CTA 2009 (pre-trading expenses) has effect in relation to those
expenses as if the company had started to carry on the relevant trade at time T.

(3) 40The condition in this subsection is that—

(a) no deduction would be allowed for the expenses in calculating the
profits of the relevant trade for corporation tax purposes (ignoring
subsection (2)), but

(b) a deduction would be allowed for them (in accordance with sections 41
45and section 61 of CTA 2009) if the company had not been within the
charge to corporation tax in respect of the relevant trade immediately
before time T.

(4) The condition in this subsection is that no relief has been obtained for the
expenses under the law of any country or territory outside the United
Kingdom.

80 Commencement and transitional provision: sections 75, 76 and 79

(1) 5The amendments made by sections 75, 76 and 79 have effect in relation to
disposals on or after 5 July 2016.

(2) In subsection (1) of section 5A of CTA 2009 (tax avoidance in relation to section
5(2A) of that Act) “arrangement” does not include an arrangement (as defined
in section 5A(6) of that Act) entered into before 16 March 2016.

(3) 10In subsection (1) of section 356OK of CTA 2010 (tax avoidance in relation to
Part 8ZB of CTA 2010) “arrangement” does not include an arrangement (as
defined in section 356OP of that Act) entered into before 16 March 2016.

(4) Subsection (6) applies if—

(a) a person disposes of a relevant asset to a person who is associated with
15that person at the relevant time,

(b) the disposal is made on or after 16 March 2016 and before 5 July 2016,
and

(c) a company obtains a relevant tax advantage as a result of the disposal.

(5) In subsection (4) the reference to obtaining a relevant tax advantage includes
20obtaining 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 the double taxation
arrangements (and subsection (6) has effect accordingly, regardless of
anything in section 6(1) of TIOPA 2010).

(6) 25The tax advantage is to be counteracted by means of adjustments.

(7) Adjustments for the purposes of subsection (6) 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.

(8) 30In subsection (4)(c) “relevant tax advantage” means a tax advantage in relation
to tax to which the company in question is charged or chargeable (or would, if
the tax advantage were not obtained, be charged or chargeable)—

(a) by virtue of section 5(2A) of CTA 2009, or

(b) in respect of amounts treated as profits of a trade by virtue of Part 8ZB
35of CTA 2010.

(9) For the purposes of this section, where any property is disposed of under a
contract, the time at which the disposal is made is the time the contract is made
(and not, if different, the time at which the property is conveyed or
transferred).

(10) 40In subsection (9) “contract” includes a conditional contract.

(11) In this section—

• “arrangement” includes any scheme, agreement or understanding
  (whether or not legally enforceable);

• “disposal” is to be interpreted in accordance with section 356OQ of CTA
  452010;

Finance BillPage 166

• “relevant asset” means land, or property deriving the whole or part of its
  value from land;

• “tax advantage” has the meaning given by section 1139 of CTA 2010.

(12) For the purposes of this section a person (“A”) is “associated” with another
5person (“B”) if—

(a) A is connected with B by virtue of any of subsections (5) to (7) of section
1122 of CTA 2010 (read in accordance with section 1123 of that Act), or

(b) A is related to B.

(13) In subsection (12) “related to” is to be interpreted in accordance with section
10356OT of CTA 2010.

(14) In subsection (4) “the relevant time”—

(a) in a case within subsection (8)(a), means the time of the disposal
mentioned in subsection (4)(a).

(b) in a case within subsection (8)(b), means any time in the period
15beginning when the activities of the project began and ending 6 months
after the disposal mentioned in section 356OB(1) or 356OD(1) of CTA
2010.

(15) In subsection (14) “the project” means (as the case requires) the project
described in section 356OB(9) of CTA 2010 or the activities mentioned in
20section 356OD(2)(a) of that Act.

81 Commencement and transitional provision: sections 77 and 78

(1) The amendments made by sections 77 and 78 have effect in relation to
disposals on or after 5 July 2016.

(2) In subsection (1) of section 6A of ITA 2007 (tax avoidance arrangements in
25relation to section 6(1A) of that Act) “arrangement” does not include an
arrangement (as defined in section 6A(7) of that Act) entered into before 16
March 2016.

(3) In subsection (1) of section 517K of ITA 2007 (tax avoidance in relation to Part
9A of that Act) “arrangement” does not include an arrangement (as defined in
30section 517Q of that Act) entered into before 16 March 2016.

(4) Subsection (6) applies if—

(a) a person disposes of a relevant asset to a person who is associated with
that person at the relevant time,

(b) the disposal is made on or after 16 March 2016 and before 5 July 2016,
35and

(c) a person obtains a relevant tax advantage as a result of the disposal.

(5) In subsection (4) 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
40contrary to the object and purpose of the provisions of the double taxation
arrangements (and subsection (6) has effect accordingly, regardless of
anything in section 6(1) of TIOPA 2010).

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

(7) Adjustments for the purposes of subsection (6) may be made (whether by an
45officer 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.

(8) In subsection (4)(c) “relevant tax advantage” means a tax advantage in relation
to tax to which the person in question is charged or chargeable (or would, if the
5tax advantage were not obtained, be charged or chargeable)—

(a) by virtue of section 6(1A) of ITTOIA 2005, or

(b) in respect of amounts treated as profits of a trade by virtue of Part 9A
of ITA 2007.

(9) For the purposes of this section, where any property is disposed of under a
10contract, the time at which the disposal is made is the time the contract is made
(and not, if different, the time at which the property is conveyed or
transferred).

(10) In subsection (9) “contract” includes a conditional contract.

(11) In this section—

• 15“arrangement” includes any scheme, agreement or understanding
  (whether or not legally enforceable);

• “disposal” is to be interpreted in accordance with section 517R of ITA2007;

• “relevant asset” means land, or property deriving the whole or part of its
  value from land;

• 20“tax advantage” has the same meaning as in section 6A of ITTOIA 2005.

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

(a) A is connected with B by virtue of any of subsections (2) to (4) of section
993 of ITA 2007 (read in accordance with section 994 of that Act), or

(b) 25A is related to B.

(13) In subsection (12) “related to” is to be interpreted in accordance with section
517U of ITA 2007.

(14) In subsection (4), “the relevant time”—

(a) in a case within subsection (8)(a), means the time when the disposal
30was made,

(b) in a case within subsection (8)(b), means any time in the period
beginning when the activities of the project began and ending 6 months
after the disposal mentioned in section 517B(1) or 517D(1) of ITA 2007.

(15) In subsection (14) “the project” means (as the case requires) the project
35described in section 517B(9) of ITA 2007 or the activities mentioned in section
517D(2)(a) of that Act.

Part 4 Capital gains tax

Rate

82 40Reduction in rate of capital gains tax

(1) Section 4 of TCGA 1992 (rates of capital gains tax) is amended as set out in
subsections (2) to (11).

(2) In subsection (1) after “entrepreneurs’ relief)” insert “and section 169VC (rate
in case of claim for investors’ relief)”.

(3) In subsection (2)—

(a) after “section” insert “and section 4BA”, and

(b) 5for the words from “in respect” to the end substitute—

“(a) in respect of upper rate gains accruing to a person in a
tax year, is 18%, and

(b) in respect of gains accruing to a person in a tax year
which are not upper rate gains, is 10%.””

(4) 10After subsection (2) insert—

“(2A) In this section “upper rate gains” means—

(a) residential property gains (see section 4BB),

(b) NRCGT gains (see section 14D), and

(c) gains accruing under section 103KA(2) or (3) (carried interest).””

(5) 15For subsection (3) substitute—

“(3) The rate of capital gains tax in respect of gains accruing in a tax year to
the trustees of a settlement or the personal representatives of a
deceased person—

(a) in respect of upper rate gains, is 28%, and

(b) 20in respect of gains which are not upper rate gains, is 20%.””

(6) In subsection (4), for the words from the second “in respect” to the end
substitute—

“(a) in respect of upper rate gains accruing to the individual in the
tax year, is 28%, and

(b) 25in respect of gains accruing to the individual in the tax year
which are not upper rate gains, is 20%.””

(7) In subsection (5) for “28%” substitute “(subject to section 4BA) 20%”.

(8) For subsection (6) substitute—

“(6) Subsection (6A) applies for the purposes of subsection (5) where—

(a) 30there is an excess as mentioned in that subsection (“the higher-
rate excess”), and

(b) the amount on which the individual is chargeable to capital
gains tax for the tax year includes any special rate gains, that is,
gains which are—

(i) 35chargeable to capital gains tax at the rate in section
169N(3), or

(ii) chargeable to capital gains tax at the rate in section
169VC(2).

(6A) Where this subsection applies—

(a) 40if the total amount of the special rate gains exceeds the unused
part of the individual’s basic rate band, the higher-rate excess is
to be treated as reduced by the amount by which the special rate
gains exceed that unused part;

(b) if not, the higher-rate excess is to be treated as consisting of
45gains other than the special rate gains.”

(6B)(a)if the total amount of the special rate gains exceeds the unused
part of the individual’s basic rate band, the higher-rate excess is
to be treated as reduced by the amount by which the special rate
gains exceed that unused part;

(b) 50if not, the higher-rate excess is to be treated as consisting of
gains other than the special rate gains.””

(9) In subsection (7) for “The reference in subsection (5)” substitute “Any reference
in this section”.

(10) In subsection (9) after “this section” insert “and section 4BA”.

(11) In subsection (10) after “and (5)” insert “and section 4BA(1)”.

(12) 5In section 4A of TCGA 1992 (special cases), in subsection (5) after “and (5)”
insert “and section 4BA(1)”.

(13) After section 4B of TCGA 1992 insert—

“4BA Rates, and use of unused basic rate band, in certain cases

(1) This section applies where an individual is chargeable to capital gains
10tax in respect of gains accruing in a tax year and—

(a) no income tax is chargeable at the higher rate, the Welsh higher
rate or the dividend upper rate in respect of the income of the
individual for the tax year,

(b) the amount on which the individual is chargeable to capital
15gains tax for the tax year (“the chargeable gains amount”)
exceeds the unused part of the individual’s basic rate band, and

(c) all or part of the chargeable gains amount consists of upper rate
gains.

(2) In the following provisions of this section “the available gains” means
20the gains on which the individual is chargeable to capital gains tax for
the tax year, excluding any special rate gains.

(3) The available gains not used by the individual under subsection (4) are
to be charged to capital gains tax—

(a) to the extent that they consist of upper rate gains, at the rate in
25section 4(4)(a);

(b) to the extent that they consist of gains which are not upper rate
gains, at the rate in section 4(5).

(4) The individual may, subject to subsection (5) (which limits the overall
amount that can be used under this subsection)—

(a) 30use any of the available gains that are upper rate gains to be
charged at the rate in section 4(2)(a);

(b) use any of the available gains that are not upper rate gains to be
charged at the rate in section 4(2)(b).

(5) The total amount of gains used under subsection (4) must equal the
35qualifying amount.

(6) The “qualifying amount” is the unused part of the individual’s basic
rate band less the total amount of any special rate gains.

(7) If special rate gains are included in the chargeable gains amount,
subsection (4) applies only if the unused part of the individual’s basic
40rate band exceeds the total amount of the special rate gains.

(8) In this section—

• “upper rate gains” has the same meaning as in section 4;

• “special rate gains” has the same meaning as in section 4(6);

• “the unused part of the individual’s basic rate band” has the same
  45meaning as in section 4.