Finance (No. 2) Bill (HL Bill 156)

(8) The consideration mentioned in subsection (7)(a) is to be calculated
on the basis that the partner is not a partner in the firm and is acting
at arm’s length from the firm.

357WBC “Disqualified firm”

(1) 5For the purposes of this Chapter, a firm is a “disqualified firm” in
relation to a period if conditions A and B are met.

(2) Condition A is that the firm has a NIRE in the period as a result of
tax-avoidance arrangements.

(3) Condition B is that—

(a) 1050% or more of the working time that is spent in the United
Kingdom during the period by members of the firm’s
workforce is working time spent by partners otherwise than
in Northern Ireland, or

(b) 50% or more of the firm’s workforce expenses that are
15attributable to working time spent in the United Kingdom
during the period by members of the firm’s workforce are
attributable to working time spent by partners otherwise
than in Northern Ireland.

(4) For the purposes of this section “tax avoidance arrangements” means
20arrangements the sole or main purpose of which is to secure that any
profits or losses of the firm for the period are Northern Ireland
profits or losses.

(5) In subsection (4) “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
25(whether or not legally enforceable).

(6) The following provisions apply for the purposes of this section as
they apply for the purposes of section 357WBA (Northern Ireland
workforce partnership conditions)—

(a) subsections (2) to (5) of that section;

(b) 30regulations made under that section;

(c) section 357WBB.””

16 In section 357WC (Northern Ireland profits etc of firm determined under
Chapter 6), in subsection (2), for “SME partnership condition” substitute
“SME (Northern Ireland employer) partnership condition”.

17 (1) 35Section 357WD (Northern Ireland profits etc of firm determined under
Chapter 7) is amended as follows.

(2) For subsections (1) to (3) substitute—

“(1) This section applies where—

(a) a company (“the corporate partner”) is a partner in a firm at
40any time during an accounting period of the firm (“the firm’s
accounting period”) and is within the charge to corporation
tax in relation to the firm’s trade, and

(b) condition A or B is met.

(2) Condition A is that the firm is a Northern Ireland firm in the firm’s
45accounting period by virtue of the SME (election) partnership
condition or the large partnership condition in section 357WA.

(3) Condition B is that—

(a) the firm is a Northern Ireland firm in the firm’s accounting
period by virtue of the SME (Northern Ireland employer)
partnership condition in section 357WA, and

(b) 5the corporate partner is not an SME in relation to an
accounting period of the corporate partner which is the same
as, or overlaps (to any extent), the firm’s accounting period.””

(3) In subsection (4), after “losses etc:” insert “SMEs that are not Northern
Ireland employers and”.

18 10In section 357WE (sections 357WC and 357WD: interpretation), omit
subsection (2).

19 (1) Section 357WF (application of section 747 of CTA 2009 to Northern Ireland
firm) is amended as follows.

(2) In paragraph (e)—

(a) 15for “SME condition” substitute “SME (Northern Ireland employer)
condition”;

(b) for “SME partnership condition” substitute “SME (Northern Ireland
employer) partnership condition”.

(3) After paragraph (e) insert—

“(ea) 20references to the SME (election) condition in section 357KA
were to the SME (election) partnership condition in section
357WA;”.”

20 (1) Section 357WG (application of Part 8A to Northern Ireland firm) is amended
as follows.

(2) 25In paragraph (g)—

(a) for “SME condition” (in the first place it appears) substitute “SME
(Northern Ireland employer) condition”;

(b) for “SME condition” (in the second place it appears) substitute “SME
(Northern Ireland employer) partnership condition”.

(3) 30For paragraph (h) substitute—

“(h) references in section 357VC to—

(i) the SME (election) condition in section 357KA were to
the SME (election) partnership condition in section
357WA;

(ii) 35the large company condition in section 357KA were to
the large partnership condition in section 357WA;

(iii) a qualifying trade by virtue of section 357KB(1) were
to a qualifying partnership trade by virtue of section
357WB(1).””

21 40In Schedule 4 (index of defined expressions)—

(a) omit the entry for “SME condition (in Part 8B)”;

(b) at the appropriate places, insert—

Amendments relating to capital allowances

22 CAA 2001 is amended in accordance with paragraphs 23 and 24.

23 (1) 5Section 6A (“NIRE company” and “Northern Ireland SME company”) is
amended as follows.

(2) In the heading, for “Northern Ireland SME company” substitute “SME
(Northern Ireland employer) company”.

(3) In the definition of “NIRE company”, after “by virtue of” insert “the SME
10(election) condition or”.

(4) For “Northern Ireland SME company” substitute “SME (Northern Ireland
employer) company”.

(5) For “SME condition” substitute “SME (Northern Ireland employer)
condition”.

24 15In the following provisions, for “a Northern Ireland SME company”
substitute “an SME (Northern Ireland employer) company”—

(a) section 6C(1)(a) and (c);

(b) section 6D(1);

(c) section 6E(1);

(d) 20section 61(4B)(a);

(e) section 66B(1)(a), (b) and (c);

(f) section 66C(b);

(g) section 66D(1)(a) and (b);

(h) section 66E(b);

(i) 25section 212ZE(b);

(j) Schedule 1.

25 In CT(NI)A 2015, in Schedule 1, in Part 6 (capital allowances: transitional
provision), in paragraphs 20(1)(a) and 21(1)(a), for “a Northern Ireland SME
company” substitute “an SME (Northern Ireland employer) company”.

30Part 2 Minor amendments

26 In section 357IA of CTA 2010 (power of Northern Ireland Assembly to set
Northern Ireland rate), for “Minister of Finance and Personnel” substitute
“Minister of Finance”.

27 35In section 357QB(5)(b) of that Act (tax credit: entitlement) , for “Chapter 2”
substitute “land remediation”.

28 In Schedule A1 of CAA 2001 (first-year tax credits), in paragraph 2, for sub-
paragraphs (3A) and (4) substitute—

“(4) The Treasury may by regulations amend sub-paragraph (1)—

(a) so as to provide for a different percentage to apply where
the surrenderable loss relates to a qualifying activity that is
an NI rate activity, or

(b) so as to substitute for any percentage for the time being
5specified in that sub-paragraph such other percentage as
the Treasury thinks fit.””

29 In consequence of paragraph 28, in the Corporation Tax (Northern Ireland)
Act 2015, in Schedule 1, omit paragraph 10.

Part 3 10Commencement etc

30 (1) Any power to make regulations under Part 8B of CTA 2010 by virtue of Part
1 or 2 of this Schedule may be exercised on or after the day on which this Act
is passed.

(2) Section 4 of CT(NI)A 2015 (power to make consequential amendments) has
15effect as if Parts 1 and 2 of this Schedule were contained in that Act.

(3) Section 5(4) to (6) of CT(NI)A 2015 (commencement) has effect as if—

(a) references to Part 8B of CTA 2010 were to that Part as amended by
Parts 1 and 2 of this Schedule, and

(b) references to the amendments made by Schedules 1 and 2 to
20CT(NI)A 2015 included the amendments made by paragraphs 21 to
24 of this Schedule.

Section 41

SCHEDULE 13 Deemed domicile: income tax and capital gains tax

Part 1 25Application of deemed domicile rule

ICTA 1988

1 (1) In section 266A of ICTA 1988 (life assurance premiums paid by employer),
after subsection (8) insert—

“(8A) Section 835BA of ITA 2007 (deemed domicile) applies for the
30purposes of subsection (6)(b).””

(2) The amendment made by this paragraph has effect in relation to the tax year
2017-18 and subsequent tax years.

TCGA 1992

2 TCGA 1992 is amended as follows.

3 (1) 35Section 16ZA (losses: non-UK domiciled individuals) is amended as follows.

(2) For subsections (1) to (3) substitute—

“(1) An individual may make an election under this section in respect
of—

(a) the first tax year in which section 809B of ITA 2007 (claim for
5remittance basis) applies to the individual, or

(b) the first tax year in which that section applies to the
individual following a period in which the individual has
been domiciled in the United Kingdom.

(2) Where an individual makes an election under this section in respect
10of a tax year, the election has effect in relation to the individual for—

(a) that tax year, and

(b) all subsequent tax years.

(2A) But if after making an election under this section an individual
becomes domiciled in the United Kingdom at any time in a tax year,
15the election does not have effect in relation to the individual for—

(a) that tax year, or

(b) any subsequent tax year.

(2B) Where an election made by an individual under this section in
respect of a tax year ceases to have effect by virtue of subsection (2A),
20the fact that it has ceased to have effect does not prevent the
individual from making another election under this section in
respect of a later tax year.

(3) If an individual does not make an election under this section in
respect of a year referred to in subsection (1)(a) or (b), foreign losses
25accruing to the individual in—

(a) that tax year, or

(b) any subsequent tax year except one in which the individual is
domiciled in the United Kingdom,

are not allowable losses.””

(3) 30After subsection (6) insert—

“(7) Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of this section.””

(4) The amendments made by this paragraph have effect in relation to the tax
year 2017-18 and subsequent tax years.

(5) 35Where—

(a) an individual makes an election under section 16ZA of TCGA 1992
as originally enacted for a tax year before the tax year 2017-18, but

(b) after making the election the individual becomes domiciled in the
United Kingdom at any time in a tax year,

40sections 16ZB and 16ZC of that Act do not have effect in relation to the
individual by virtue of that election for that tax year or any subsequent tax
year.

(6) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of
sub-paragraph (5).

4 (1) 45In section 16ZB (election under section 16ZA: foreign chargeable gains
remitted in the tax year after that in which they accrue), in subsection (1), for

paragraphs (a) and (b) substitute—

“(a) the individual has made an election under section 16ZA in
respect of a tax year before the applicable year,

(aa) the election has effect in relation to the individual for the
5applicable year,

(b) foreign chargeable gains accrued to the individual in or after
the tax year in respect of which the election was made but
before the applicable year, and”.”

(2) The amendment made by this paragraph has effect in relation to the tax year
102017-18 and subsequent tax years.

5 (1) In section 16ZC (election under section 16ZA by individual to whom
remittance basis applies), in subsection (1), for paragraphs (a) to (c)
substitute—

“(a) the individual has made an election under section 16ZA in
15respect of the tax year or any earlier tax year,

(b) the election has effect in relation to the individual for the tax
year, and

(c) section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to the individual for the tax year.””

(2) 20The amendment made by this paragraph has effect in relation to the tax year
2017-18 and subsequent tax years.

6 (1) In section 69 (trustees of settlements), after subsection (2E) insert—

“(2F) Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of subsection (2B)(c).””

(2) 25The amendment made by this paragraph has effect in relation to a
settlement—

(a) in a case where the settlement arose on the settlor’s death (whether
by will, intestacy or otherwise), where the settlor died on or after 6
April 2017;

(b) 30in any other case, where the settlor made the settlement (or was
treated for the purposes of TCGA 1992 as making the settlement) on
or after 6 April 2017.

7 (1) In section 86 (attribution of gains to settlors with interest in non-resident or
dual resident settlements), after subsection (3) insert—

“(3A) 35Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of subsection (1)(c).””

(2) The amendment made by this paragraph has effect in relation to the tax year
2017-18 and subsequent tax years.

8 (1) In section 275 (location of assets), after subsection (3) insert—

“(3A) 40Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of subsection (1)(l)(iii).””

(2) The amendment made by this paragraph has effect for the purposes of
determining for the purposes of TCGA 1992 the situation of any asset, or
whether the situation of any asset is in the United Kingdom, at any time on
45or after 6 April 2017 (irrespective of when the asset was acquired by the
person holding it).

9 (1) In Schedule 5A (settlements with foreign element: information), in
paragraph 3, after sub-paragraph (3) insert—

“(3A) Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of sub-paragraph (3).””

(2) 5The amendment made by this paragraph has effect in relation to settlements
created on or after 6 April 2017.

ITEPA 2003

10 (1) ITEPA 2003 is amended as follows.

(2) In section 355 (deductions for corresponding payments by non-domiciled
10employees with foreign employers), in subsection (2), at the end insert “(and
section 835BA of ITA 2007 (deemed domicile) applies for the purposes of this
subsection)”.

(3) In section 373 (non-domiciled employee’s travel costs and expenses where
duties performed in UK), at the end insert—

“(7) 15Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of subsection (1).””

(4) In section 374 (non-domiciled employee’s spouse’s etc travel costs and
expenses where duties performed in UK), at the end insert —

“(10) Section 835BA of ITA 2007 (deemed domicile) applies for the
20purposes of subsection (1).””

(5) In section 376 (foreign accommodation and subsistence costs and expenses
(overseas employment)), at the end insert —

“(6) Section 835BA of ITA 2007 (deemed domicile) applies for the
purposes of subsection (1)(c).””

(6) 25The amendments made by this paragraph have effect in relation to the tax
year 2017-18 and subsequent tax years.

ITA 2007

11 ITA 2007 is amended as follows.

12 (1) In section 476 (how to work out whether settlor meets condition C in section
30475), after subsection (3) insert—

“(3A) Section 835BA (deemed domicile) applies for the purposes of
subsections (2)(b) and (3)(b).””

(2) The amendment made by this paragraph has effect—

(a) so far as relating to section 476(2)(b) of ITA 2007, in relation to a
35settlor who dies on or after 6 April 2017;

(b) so far as relating to section 476(3)(b) of ITA 2007, in relation to a
settlement made on or after 6 April 2017.

13 (1) In section 718 (meaning of “person abroad” etc), after subsection (2) insert—

“(3) Section 835BA (deemed domicile) applies for the purposes of
40subsection (1)(b).””

(2) The amendment made by this paragraph has effect in relation to the tax year
2017-18 and subsequent tax years.

14 (1) Chapter A1 of Part 14 (remittance basis) is amended as follows.

(2) In section 809B (claim for remittance basis to apply), after subsection (1)
5insert—

“(1A) Section 835BA (deemed domicile) applies for the purposes of
subsection (1)(b).””

(3) In section 809C (claim for remittance basis by long-term UK resident:
nomination) omit the following—

(a) 10in subsection (1)(b), “the 17-year residence test,”;

(b) subsection (1ZA);

(c) subsection (1A)(a);

(d) in subsection (1B)(a), “the 17-year residence test or”;

(e) subsection (4)(za).

(4) 15In section 809E (application of remittance basis without claim: other cases),
after subsection (1) insert—

“(1A) Section 835BA (deemed domicile) applies for the purposes of
subsection (1)(b).””

(5) In section 809H (claim for remittance basis by long-term UK resident:
20charge) omit the following—

(a) in subsection (1)(c), “the 17-year residence test,”;

(b) in subsection (1A)—

(i) “(1ZA)”;

(ii) “the 17-year residence test,”;

(c) 25subsection (5B)(za).

(6) The amendments made by this paragraph have effect in relation to the tax
year 2017-18 and subsequent tax years.

15 (1) This paragraph applies in a case where—

(a) section 10A of TCGA 1992 (temporary non-residents) as originally
30enacted applies in relation to an individual, and

(b) the year of return is 2017-18.

(2) For the purposes of capital gains tax in respect of foreign chargeable gains
accruing to the individual during an intervening year, the amendment made
by paragraph 14(2) does not have effect in relation to the year of return.

(3) 35Where by virtue of sub-paragraph (2) an individual makes a claim under
section 809B of ITA 2007 for the tax year 2017-18, sections 809C, 809G and
809H of ITA 2007 do not apply to the individual for that tax year.

(4) In this paragraph—

• “intervening year” and “year of return” have the same meanings as in
  40section 10A of TCGA 1992 as originally enacted;

• “foreign chargeable gain” has the meaning given by section 12(4) of
  TCGA 1992.

16 (1) This paragraph applies in a case where section 10A of TCGA 1992 as
substituted by paragraph 119 of Schedule 45 to FA 2013 applies in relation
to an individual.

(2) For the purposes of capital gains tax in respect of foreign chargeable gains
5accruing to the individual during a temporary period of non-residence
beginning before 8 July 2015, the amendment made by paragraph 14(2) does
not have effect in relation to the tax year which consists of or includes the
period of return.

(3) Where by virtue of sub-paragraph (2) an individual makes a claim under
10section 809B of ITA 2007 for any of the tax years 2017-18 to 2020-21 inclusive,
sections 809C, 809G and 809H of ITA 2007 do not apply to the individual for
that tax year.

(4) In this paragraph, “foreign chargeable gain” has the meaning given by
section 12(4) of TCGA 1992.

(5) 15Part 4 of Schedule 45 to FA 2013 explains what “temporary period of non-
residence” and “period of return” mean.

17 (1) In section 834 (residence of personal representatives), at the end insert—

“(5) Section 835BA (deemed domicile) applies for the purposes of
subsection (3).””

(2) 20The amendment made by this paragraph has effect in relation to the tax year
2017-18 and subsequent tax years.

Part 2 Protection of overseas trusts

TCGA 1992

18 25In Schedule 5 to TCGA 1992 (provisions supplementing section 86 of TCGA
1992), after paragraph 5 insert—

“5A (1) Section 86 does not apply in relation to a year (“the particular
year”) if Conditions A to D are met.

(2) Condition A is that the particular year is—

(a) 30the tax year 2017-18, or

(b) a later tax year.

(3) Condition B is that when the settlement is created the settlor—

(a) is not domiciled in the United Kingdom, and

(b) if the settlement is created on or after 6 April 2017, is not
35deemed domiciled in the United Kingdom.

(4) Condition C is that there is no time in the particular year when the
settlor is—

(a) domiciled in the United Kingdom, or

(b) deemed domiciled in the United Kingdom by virtue of
40Condition A in section 835BA of ITA 2007.

(5) Condition D is that no property or income is provided directly or
indirectly for the purposes of the settlement by the settlor, or by

the trustees of another settlement of which the settlor is the settlor
or a beneficiary, at a time in the relevant period when the settlor
is—

(a) domiciled in the United Kingdom, or

(b) 5deemed domiciled in the United Kingdom.

(6) In sub-paragraph (5) “relevant period” means the period—

(a) beginning with the start of 6 April 2017 or, if later, the
creation of the settlement, and

(b) ending with the end of the particular year.

(7) 10For the purposes of Condition D, the addition of value to property
comprised in the settlement is to be treated as the direct provision
of property for the purposes of the settlement.

(8) Paragraph 5B contains further provision for the purposes of
Condition D.

(9) 15In this paragraph “deemed domiciled” means regarded for the
purposes of section 86(1)(c) as domiciled in the United Kingdom
as a result of section 835BA of ITA 2007 having effect.

5B (1) This paragraph applies for the purposes of Condition D in
paragraph 5A.

(2) 20Ignore—

(a) property or income provided under a transaction, other
than a loan, where the transaction is entered into on arm’s
length terms,

(b) property or income provided, otherwise than under a loan,
25without any intention by the person providing it to confer
a gratuitous benefit on any person,

(c) the principal of a loan which is made to the trustees of the
settlement on arm’s length terms,

(d) the payment of interest to the trustees of the settlement
30under a loan made by them on arm’s length terms,

(e) repayment to the trustees of the settlement of the principal
of a loan made by them,

(f) property or income provided in pursuance of a liability
incurred by any person before 6 April 2017, and

(g) 35where the settlement’s expenses relating to taxation and
administration for a tax year exceed its income for that
year, property or income provided towards meeting that
excess if the value of any such property and income is not
greater than the amount of—

(i) 40the excess, or

(ii) if greater, the amount by which such expenses
exceed the amount of such expenses which may be
paid out of the settlement’s income.

(3) Where—

(a) 45a loan is made to the trustees of the settlement by the
settlor or the trustees of a settlement connected with the
settlor, and

(b) the loan is on arm’s length terms, but