Finance Bill (HC Bill 102)

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(b) by the end of the relevant period it has not failed to meet the
temporary importation rule in section 809Z4 of ITA 2007.

(4) Section 809M(3)(a) and (b) of ITA 2007 (persons living together) apply for
the purposes of sub-paragraph (2)(d)(i).

43 (1) 5An individual may make an election for paragraph 41 not to apply to a
disposal made by the individual.

(2) Sections 42 and 43 of TMA 1970 (procedure and time limit for claims), except
section 42(1A) of that Act, apply in relation to an election under this
paragraph as they apply in relation to a claim for relief.

(3) 10An election under this paragraph is irrevocable.

(4) All such adjustments are to be made, whether by way of discharge or
repayment of tax, the making of assessments or otherwise, as are required to
give effect to an election under this paragraph.

Part 4 15Cleansing of mixed funds

44 (1) This paragraph applies for the purposes of the application of section 809Q(3)
of ITA 2007 in relation to an individual (“P”).

(2) Section 809R(4) of ITA 2007 does not apply to an offshore transfer from a
mixed fund where—

(a) 20the transfer is made in the tax year 2017-18 or the tax year 2018-19,

(b) the transfer is a transfer of money,

(c) the mixed fund from which the transfer is made is an account
(account A) and the transfer is made to another account (account B),

(d) the transfer is nominated by P for the purposes of this sub-
25paragraph,

(e) at the time of the nomination no other transfer from account A to
account B has been so nominated, and

(f) P is a qualifying individual.

(3) P is a qualifying individual if—

(a) 30section 809B, 809D or 809E of ITA 2007 (remittance basis) applied in
relation to P for any tax year before the tax year 2017-18, and

(b) P is not an individual—

(i) who was born in the United Kingdom, and

(ii) whose domicile of origin was in the United Kingdom.

(4) 35An offshore transfer to which sub-paragraph (2) applies is to be treated as
containing such amount of such kind or kinds of income and capital in the
mixed fund immediately before the transfer as may be specified in the
nomination under sub-paragraph (2)(d).

(5) An amount of a kind of income or capital specified under sub-paragraph (4)
40may not exceed the amount of that kind which is in the mixed fund
immediately before the transfer.

(6) In this paragraph “mixed fund” and “offshore transfer” have the same
meanings as in section 809R(4) of ITA 2007.

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45 (1) This paragraph applies to a transfer made by a person (“P”) from a mixed
fund where—

(a) the transfer is made in the tax year 2017-18 or the tax year 2018-19,

(b) the transfer is a transfer of money,

(c) 5the mixed fund from which the transfer is made is an overseas
account (account A) containing pre-6 April 2008 income or
chargeable gains,

(d) the transfer is made to another overseas account (account B),

(e) the transfer is nominated by the person for the purposes of this sub-
10paragraph,

(f) at the time of the nomination no other transfer from account A to
account B has been so nominated, and

(g) P is a qualifying individual.

(2) P is a qualifying individual if—

(a) 15section 809B, 809D or 809E of ITA 2007 (remittance basis) applied in
relation to P for any tax year before the tax year 2017-18, and

(b) P is not an individual—

(i) who was born in the United Kingdom, or

(ii) whose domicile of origin was in the United Kingdom.

(3) 20A transfer to which this paragraph applies is to be treated as containing such
amount of such kind or kinds of income or capital in the mixed fund
immediately before the transfer (for example, income or chargeable gains for
a particular tax year) as may be specified in the nomination under sub-
paragraph (1)(e).

(4) 25An amount of a kind of income or capital specified under sub-paragraph (3)
may not exceed the amount of that kind which is in the mixed fund
immediately before the transfer.

(5) In this paragraph and paragraph 46

  • “mixed fund” has the same meaning as in section 809R(4) of ITA 2007;

  • 30“overseas account” means an account situated outside the United
    Kingdom;

  • “pre-6 April 2008 income or chargeable gains” means income or
    chargeable gains for the tax year 2007-8 or any earlier tax year.

46 (1) This paragraph applies to determine, for the purposes of paragraph 45, the
35composition of the mixed fund referred to in paragraph 45(1).

(2) Sub-paragraphs (3) to (5) apply where a transfer of money is made before 6
April 2008 from the mixed fund to another overseas account.

(3) Take the following Steps—

  • Step 1. Calculate the total amount of income and chargeable gains in the
    40mixed fund immediately before the transfer (“the total income and
    gains”).

  • Step 2. Calculate what proportion of the total income and gains is
    income and what proportion is chargeable gains.

(4) If the amount transferred does not exceed the total income and gains, the
45transfer is to be treated as if it consisted of income and chargeable gains in
the proportions found under Step 2 in sub-paragraph (3).

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(5) If the amount transferred exceeds the total income and gains, the transfer is
to be treated as if it consisted of—

(a) all the income and chargeable gains that were in the mixed fund
immediately before the transfer, and

(b) 5in respect of the balance, other capital from the mixed fund.

(6) Sub-paragraphs (7) and (8) apply where—

(a) a transfer of money is made before 6 April 2008 from another
overseas account to the mixed fund, and

(b) there is insufficient evidence to determine the composition of the
10transfer.

(7) Take the following Steps—

  • Step 1. Calculate the total amount of income and chargeable gains in the
    other overseas account immediately before the transfer (“the total
    income and gains”).

  • 15Step 2. Calculate what proportion of the total income and gains is
    income and what proportion is chargeable gains.

(8) The transfer is to be presumed to consist of income and chargeable gains in
the proportions found under Step 2 in sub-paragraph (7).

(9) For the purposes of Steps 1 and 2 in sub-paragraph (7), if there is insufficient
20evidence to say that an amount is income or that it is chargeable gains, treat
it as income.

Section 31

SCHEDULE 9 Settlements and transfer of assets abroad: value of benefits

Capital gains tax: settlements: value of benefit conferred by certain capital payments

1 (1) 25In section 97(4) of TCGA 1992 (supplementary provisions in relation to
settlements), at the end insert “(see sections 97A to 97C for the value of
benefits conferred by a capital payment made by way of loan or by way of
making movable property or land available)”.

(2) After section 97 of TCGA 1992 insert—

97A 30Value of benefit conferred by capital payment made by way of loan

(1) For the purposes of section 97(4), the value of the benefit conferred
on a person (P) by a capital payment made by way of loan to P is, for
each tax year in which the loan is outstanding, the amount (if any) by
which—

(a) 35the amount of interest that would have been payable in that
year on the loan if interest had been payable on the loan at the
official rate, exceeds

(b) the amount of interest (if any) actually paid by P in that year
on the loan.

(2) 40In this section and section 97B the “official rate”, in relation to
interest, means the rate applicable from time to time under section

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178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of
ITEPA 2003.

97B Value of benefit conferred by capital payment made by way of making
movable property available

(1) 5For the purposes of section 97(4), the value of the benefit conferred
by a capital payment consisting of making movable property
available, without any transfer of the property in it, to a person (P) is,
for each tax year in which the benefit is conferred on P—


10where—

  • CC is the capital cost of the movable property on the date when
    the property is first made available to P in the tax year,

  • D is the number of days in the tax year on which the property is
    made available to P (the relevant period),

  • 15R is the official rate of interest for the relevant period (but see
    subsection (3)),

  • T is the total of the amounts (if any) paid in the tax year by P—

    (a)

    to the person conferring the benefit, in respect of the
    availability of the movable property, or

    (b)

    20so far as not within paragraph (a), in respect of the
    repair, insurance, maintenance or storage of the
    movable property, and

  • Y is the number of days in the tax year.

(2) In subsection (1), in the meaning of CC, the “capital cost” of movable
25property means an amount equal to the total of—

(a) the amount which is the greater of—

(i) the amount or value of the consideration given for the
acquisition of the movable property by, or on behalf
of, the person (A) conferring the benefit, and

(ii) 30its market value at the time of that acquisition, and

(b) the amount of any expenditure wholly and exclusively
incurred by, or on behalf of, A for the purpose of enhancing
the value of the movable property.

(3) If the official rate of interest changes during the relevant period, then
35in subsection (1) R is the average official rate of interest for the period
calculated as follows.

Step 1

Multiply each official rate of interest in force during the relevant
period by the number of days when it is in force.

40Step 2

Add together the products found in Step 1.

Step 3

Divide the total found in Step 2 by the number of days in the relevant
period.

(4) 45In subsections (1) and (2), “movable property” means any tangible
movable property other than money.

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97C Value of benefit conferred by capital payment made by way of making
land available

(1) For the purposes of section 97(4), the value of the benefit conferred
by a capital payment consisting of making land available for the use
5of a person (P) is, for each tax year in which the benefit is conferred
on P, the amount by which—

(a) the rental value of the land for the period of the tax year
during which the land is made available to P, exceeds

(b) the total of the amounts (if any) paid in the tax year by P—

(i) 10to the person conferring the benefit, in respect of the
availability of the land, or

(ii) so far as not within sub-paragraph (i), in respect of
costs of repair, insurance or maintenance relating to
the land.

(2) 15Subsection (1) does not apply in the case where the person conferring
the benefit transfers the whole of the person’s interest in the land to
P.

(3) In subsection (1) “the rental value” of the land for a period means the
rent which would have been payable for the period if the land had
20been let to P at an annual rent equal to the annual value.

(4) For the purposes of subsection (3) “the annual value” of land is the
rent that might reasonably be expected to be obtained on a letting
from year to year if—

(a) the tenant undertook to pay all taxes, rates and charges
25usually paid by a tenant, and

(b) the landlord undertook to bear the costs of the repairs and
insurance and the other expenses (if any) necessary for
maintaining the property in a state to command that rent.

(5) For the purposes of subsection (4) that rent—

(a) 30is to be taken to be the amount that might reasonably be
expected to be so obtained in respect of a letting of the land,
and

(b) is to be calculated on the basis that the only amounts that may
be deducted in respect of services provided by the landlord
35are amounts in respect of the costs to the landlord of
providing any relevant services.

(6) In subsection (5) “relevant service” means a service other than the
repair, insurance or maintenance of the property.”

Income tax: transfer of assets abroad: value of certain benefits

2 40After section 742A of ITA 2007 insert—

“Value of certain benefits

742B Value of certain benefits

Sections 742C to 742E apply where it is necessary, for the purpose of
calculating a charge to income tax under the preceding provisions of

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this Chapter, to determine the value of a benefit provided to a person
by way of—

(a) a payment by way of loan (see section 742C),

(b) making available movable property without any transfer of
5the property in it (see section 742D), or

(c) making available land for use without transferring the whole
interest in it (see section 742E).

742C Value of benefit provided by a payment by way of loan

(1) The value of the benefit provided to a person (P) by a payment by
10way of loan to P is, for each tax year in which the loan is outstanding,
the amount (if any) by which—

(a) the amount of interest that would have been payable in that
year on the loan if interest had been payable on the loan at the
official rate, exceeds

(b) 15the amount of interest (if any) actually paid by P in that year
on the loan.

(2) In this section and section 742D the “official rate”, in relation to
interest, means the rate applicable from time to time under section
178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of
20ITEPA 2003.

742D Value of benefit provided by making movable property available

(1) The value of the benefit provided by making movable property
available, without any transfer of the property in it, to a person (P) is,
for each tax year in which the benefit is provided to P—


25

where—

  • CC is the capital cost of the movable property on the date when
    the property is first made available to P in the tax year,

  • D is the number of days in the tax year on which the property is
    30made available to P (the relevant period),

  • R is the official rate of interest for the relevant period (but see
    subsection (3)),

  • T is the total of the amounts (if any) paid in the tax year by P—

    (a)

    to the person providing the benefit, in respect of the
    35availability of the movable property, or

    (b)

    so far as not within paragraph (a), in respect of the
    repair, insurance, maintenance or storage of the
    movable property, and

  • Y is the number of days in the tax year.

(2) 40In subsection (1), in the meaning of CC, the “capital cost” of the
movable property means an amount equal to the total of—

(a) the amount which is the greater of—

(i) the amount or value of the consideration given for the
acquisition of the movable property by, or on behalf
45of, the person (A) providing the benefit, and

(ii) its market value at the time of that acquisition, and

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(b) the amount of any expenditure wholly and exclusively
incurred by, or on behalf of, A for the purpose of enhancing
the value of the movable property.

(3) If the official rate of interest changes during the relevant period, then
5in subsection (1) R is the average official rate of interest for the period
calculated as follows.

Step 1

Multiply each official rate of interest in force during the relevant
period by the number of days when it is in force.

10Step 2

Add together the products found in Step 1.

Step 3

Divide the total found in Step 2 by the number of days in the relevant
period.

(4) 15In subsections (1) and (2), “movable property” means any tangible
movable property other than money.

742E Value of benefit provided by making land available

(1) The value of the benefit provided by making land available for the
use of a person (P) is, for each tax year in which the benefit is
20provided to P, the amount by which—

(a) the rental value of the land for the period of the tax year
during which the land is made available to P, exceeds

(b) the total of the amounts (if any) paid in the tax year by P—

(i) to the person providing the benefit, in respect of the
25availability of the land, or

(ii) so far as not within sub-paragraph (i), in respect of
costs of repair, insurance or maintenance relating to
the land.

(2) Subsection (1) does not apply in the case where the person providing
30the benefit transfers the whole of the person’s interest in the land to
P.

(3) In subsection (1) “the rental value” of the land for a period means the
rent which would have been payable for the period if the land had
been let to P at an annual rent equal to the annual value.

(4) 35For the purposes of subsection (3) “the annual value” of land is the
rent that might reasonably be expected to be obtained on a letting
from year to year if—

(a) the tenant undertook to pay all taxes, rates and charges
usually paid by a tenant, and

(b) 40the landlord undertook to bear the costs of the repairs and
insurance and the other expenses (if any) necessary for
maintaining the property in a state to command that rent.

(5) For the purposes of subsection (4) that rent—

(a) is to be taken to be the amount that might reasonably be
45expected to be so obtained in respect of a letting of the land,
and

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(b) is to be calculated on the basis that the only amounts that may
be deducted in respect of services provided by the landlord
are amounts in respect of the costs to the landlord of
providing any relevant services.

(6) 5In subsection (5) “relevant service” means a service other than the
repair, insurance or maintenance of the property.”

Commencement

3 The amendments made by this Schedule have effect in relation to capital
payments or benefits received in the tax year 2017-18 and subsequent tax
10years.

SCHEDULE 10 Section 33 Inheritance tax on overseas property representing UK residential property

Non-excluded overseas property

1 In IHTA 1984, before Schedule 1 insert—

15“Schedule A1 Non-excluded overseas property

Part 1 Overseas property with value attributable to UK residential property
Introductory

1 20Property is not excluded property by virtue of section 6(1) or
48(3)(a) if and to the extent that paragraph 2 or 3 applies to it.

Close company and partnership interests

2 (1) This paragraph applies to an interest in a close company or in a
partnership, if and to the extent that the interest meets the
25condition in sub-paragraph (2).

(2) The condition is that the value of the interest is—

(a) directly attributable to a UK residential property interest,
or

(b) attributable to a UK residential property interest by virtue
30only of one or more of the following—

(i) an interest in a close company;

(ii) an interest in a partnership;

(iii) property to which paragraph 3 (loans) applies.

(3) For the purposes of sub-paragraphs (1) and (2) disregard—

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(a) an interest in a close company, if the value of the interest is
less than 5% of the total value of all the interests in the close
company;

(b) an interest in a partnership, if the value of the interest is
5less than 5% of the total value of all the interests in the
partnership.

(4) In determining under sub-paragraph (3) whether to disregard a
person’s interest in a close company or partnership, treat the value
of the person’s interest as increased by the value of any connected
10person’s interest in the close company or partnership.

(5) In determining whether or to what extent the value of an interest
in a close company or in a partnership is attributable to a UK
residential property interest for the purposes of sub-paragraph (1),
liabilities of a close company or partnership are to be attributed
15rateably to all of its property, whether or not they would otherwise
be attributed to any particular property.

Loans

3 This paragraph applies to—

(a) the rights of a creditor in respect of a loan which is a
20relevant loan (see paragraph 4), and

(b) money or money’s worth held or otherwise made
available as security, collateral or guarantee for a loan
which is a relevant loan, to the extent that it does not
exceed the value of the relevant loan.

4 (1) 25For the purposes of this Schedule a loan is a relevant loan if and to
the extent that money or money’s worth made available under the
loan is used to finance, directly or indirectly—

(a) the acquisition by an individual, a partnership or the
trustees of a settlement of—

(i) 30a UK residential property interest, or

(ii) property to which paragraph 2 to any extent
applies, or

(b) the acquisition by an individual, a partnership or the
trustees of a settlement of an interest in a close company or
35a partnership (“the intermediary”) and the acquisition by
the intermediary of property within paragraph (a)(i) or (ii).

(2) In this paragraph references to money or money’s worth made
available under a loan or sale proceeds being used “indirectly” to
finance the acquisition of something include the money or
40money’s worth or sale proceeds being used to finance—

(a) the acquisition of any property the proceeds of sale of
which are used directly or indirectly to finance the
acquisition of that thing, or

(b) the making, or repayment, of a loan to finance the
45acquisition of that thing.

(3) In this paragraph references to the acquisition of a UK residential
property interest by an individual, a partnership, the trustees of a
settlement or a close company include the maintenance, or an

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enhancement, of the value of a UK residential property interest
which is (as the case may be) the property of the individual,
property comprised in the settlement or property of the
partnership or close company.

(4) 5Where the UK residential property interest by virtue of which a
loan is a relevant loan is disposed of, the loan ceases to be a
relevant loan.

(5) Where a proportion of the UK residential property interest by
virtue of which a loan is a relevant loan is disposed of, the loan
10ceases to be a relevant loan by the same proportion.

(6) In this Schedule, references to a loan include an acknowledgment
of debt by a person or any other arrangement under which a debt
arises; and in such a case references to money or money’s worth
made available under the loan are to the amount of the debt.

15Part 2 Supplementary
Disposals and repayments

5 (1) This paragraph applies to—

(a) property which constitutes consideration in money or
20money’s worth for the disposal of property to which
paragraph 2 or paragraph 3(a) applies;

(b) any money or money’s worth paid in respect of a creditor’s
rights falling within paragraph 3(a);

(c) any property directly or indirectly representing property
25within paragraph (a) or (b).

(2) If and to the extent that this paragraph applies to any property—

(a) for the two-year period it is not excluded property by
virtue of section 6(1), (1A) or (2) or 48(3)(a), (3A) or (4), and

(b) if it is held in a qualifying foreign currency account within
30the meaning of section 157 (non-residents’ bank accounts),
that section does not apply to it for the two-year period.

(3) The two-year period is the period of two years beginning with the
date of—

(a) the disposal referred to in sub-paragraph (1)(a), or

(b) 35the payment referred to in sub-paragraph (1)(b).

(4) The value of any property within sub-paragraph (1)(c) is to be
treated as not exceeding the relevant amount.

(5) The relevant amount is—

(a) where the property within sub-paragraph (1)(c) directly or
40indirectly represents property within sub-paragraph (1)(a)
(“the consideration”), the value of the consideration at the
time of the disposal referred to in that sub-paragraph, and

(b) where the property within sub-paragraph (1)(c) directly or
indirectly represents property within sub-paragraph

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(1)(b), the amount of the money or money’s worth paid as
mentioned in that sub-paragraph.

Tax avoidance arrangements

6 (1) In determining whether or to what extent property situated
5outside the United Kingdom is excluded property, no regard is to
be had to any arrangements the purpose or one of the main
purposes of which is to secure a tax advantage by avoiding or
minimising the effect of paragraph 1 or 5.

(2) In this paragraph—

  • 10“tax advantage” has the meaning given in section 208 of the
    Finance Act 2013;

  • “arrangements” includes any scheme, transaction or series of
    transactions, agreement or understanding (whether or not
    legally enforceable and whenever entered into) and any
    15associated operations.

Double taxation relief arrangements

7 (1) Nothing in any double taxation relief arrangements made with the
government of a territory outside the United Kingdom is to be
read as preventing a person from being liable for any amount of
20inheritance tax by virtue of paragraph 1 or 5 in relation to any
chargeable transfer if under the law of that territory—

(a) no tax of a character similar to inheritance tax is charged on
that chargeable transfer, or

(b) a tax of a character similar to inheritance tax is charged in
25relation to that chargeable transfer at an effective rate of 0%
(otherwise than by virtue of a relief or exemption).

(2) In this paragraph—

  • “double taxation relief arrangements” means arrangements
    having effect under section 158(1);

  • 30“effective rate” means the rate found by expressing the tax
    chargeable as a percentage of the amount by reference to
    which it is charged.

Part 3 Interpretation
35UK residential property interest

8 (1) In this Schedule “UK residential property interest” means an
interest in UK land—

(a) where the land consists of a dwelling,

(b) where and to the extent that the land includes a dwelling,
40or

(c) where the interest subsists under a contract for an off-plan
purchase.

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(2) For the purposes of sub-paragraph (1)(b), the extent to which land
includes a dwelling is to be determined on a just and reasonable
basis.

(3) In this paragraph—

  • 5“interest in UK land” has the meaning given by paragraph 2
    of Schedule B1 to the 1992 Act (and the power in sub-
    paragraph (5) of that paragraph applies for the purposes of
    this Schedule);

  • “the land”, in relation to an interest in UK land which is an
    10interest subsisting for the benefit of land, is a reference to
    the land for the benefit of which the interest subsists;

  • “dwelling” has the meaning given by paragraph 4 of
    Schedule B1 to the 1992 Act (and the power in paragraph 5
    of that Schedule applies for the purposes of this Schedule);

  • 15“contract for an off-plan purchase” has the meaning given by
    paragraph 1(6) of Schedule B1 to the 1992 Act.

Close companies

9 (1) In this Schedule—

  • “close company” means a company within the meaning of
    20the Corporation Tax Acts which is (or would be if resident
    in the United Kingdom) a close company for the purposes
    of those Acts;

  • references to an interest in a close company are to the rights
    and interests that a participator in a close company has in
    25that company.

(2) In this paragraph—

  • “participator”, in relation to a close company, means any
    person who is (or would be if the company were resident
    in the United Kingdom) a participator in relation to that
    30company within the meaning given by section 454 of the
    Corporation Tax Act 2010;

  • references to rights and interests in a close company include
    references to rights and interests in the assets of the
    company available for distribution among the
    35participators in the event of a winding-up or in any other
    circumstances.

Partnerships

10 In this Schedule “partnership” means—

(a) a partnership within the Partnership Act 1890,

(b) 40a limited partnership registered under the Limited
Partnerships Act 1907,

(c) a limited liability partnership formed under the Limited
Liability Partnerships Act 2000 or the Limited Liability
Partnerships Act (Northern Ireland) 2002, or

(d) 45a firm or entity of a similar character to either of those
mentioned in paragraph (a) or (b) formed under the law of
a country or territory outside the United Kingdom.”

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Consequential and supplementary amendments

2 IHTA 1984 is amended as follows.

3 In section 6 (excluded property), at the end insert—

(5) This section is subject to Schedule A1 (non-excluded overseas
5property).”

4 In section 48 (excluded property)—

(a) in subsections (3) and (3A), at the end insert “and to Schedule A1”;

(b) in subsection (4), at the end (but on a new line) insert “This
subsection is subject to Schedule A1.”

5 10In section 65 (charge at other times), after subsection (7B) (as inserted by
section 30) insert—

(7C) Tax shall not be charged under this section by reason only that
property comprised in a settlement ceases to any extent to be
property to which paragraph 2 or 3 of Schedule A1 applies and
15thereby becomes excluded property by virtue of section 48(3)(a)
above.

(7D) Tax shall not be charged under this section where property
comprised in a settlement or any part of that property—

(a) is, by virtue of paragraph 5(2)(a) of Schedule A1, not
20excluded property for the two year period referred to in that
paragraph, but

(b) becomes excluded property at the end of that period.”

6 In section 157 (non-residents’ bank accounts), after subsection (3) insert—

(3A) This section is subject to paragraph 5 of Schedule A1 (non-excluded
25overseas property).”

7 In section 237 (imposition of charge), after subsection (2) insert—

(2A) Where tax is charged by virtue of Schedule A1 on the value
transferred by a chargeable transfer, the reference in subsection (1)(a)
to property to the value of which the value transferred is wholly or
30partly attributable includes the UK residential property interest
(within the meaning of that Schedule) to which the charge to tax
relates.”

8 In section 272 (general interpretation), in the definition of “excluded
property”, after “above” insert “and Schedule A1”.

35Commencement

9 (1) The amendments made by this Schedule have effect in relation to times on
or after 6 April 2017.

(2) But for the purposes of paragraph 5(1) of Schedule A1 to IHTA 1984 as
inserted by this Schedule—

(a) 40paragraph (a) of that paragraph does not apply in relation to a
disposal of property occurring before 6 April 2017, and

(b) paragraph (b) of that paragraph does not apply in relation to a
payment of money or money’s worth occurring before 6 April 2017.

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Transitional provision

10 (1) Sub-paragraphs (2) and (3) apply if an amount of inheritance tax—

(a) would not be charged but for the amendments made by this
Schedule, or

(b) 5is, because of those amendments, greater than it would otherwise
have been.

(2) Section 233 of IHTA 1984 (interest on unpaid inheritance tax) applies in
relation to the amount of inheritance tax as if the reference, in the closing
words of subsection (1) of that section, to the end of the period mentioned in
10paragraph (a), (aa), (b) or (c) of that subsection were a reference to—

(a) the end of that period, or

(b) if later, the end of the month immediately following the month in
which this Act is passed.

(3) Subsection (1) of section 234 of IHTA 1984 (cases where inheritance tax
15payable by instalments carries interest only from instalment dates) applies
in relation to the amount of inheritance tax as if the reference, in the closing
words of that subsection, to the date at which an instalment is payable were
a reference to—

(a) the date at which the instalment is payable, or

(b) 20if later, the end of the month immediately following the month in
which this Act is passed.

11 (1) Sub-paragraph (2) applies if—

(a) a person is liable as mentioned in section 216(1)(c) of IHTA 1984
(trustee liable on 10-year anniversary, and other trust cases) for an
25amount of inheritance tax charged on an occasion, and

(b) but for the amendments made by this Schedule—

(i) no inheritance tax would be charged on that occasion, or

(ii) a lesser amount of inheritance tax would be charged on that
occasion.

(2) 30Section 216(6)(ad) of IHTA 1984 (delivery date for accounts required by
section 216(1)(c)) applies in relation to the account to be delivered in
connection with the occasion as if the reference to the expiration of the
period of 6 months from the end of the month in which the occasion occurs
were a reference to—

(a) 35the expiration of that period, or

(b) if later, the end of the month immediately following the month in
which this Act is passed.

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Section 34

SCHEDULE 11 Employment income provided through third parties: loans etc outstanding on
5 April 2019

Part 1 5Application of Part 7A of ITEPA 2003

Relevant step

1 (1) A person (“P”) is treated as taking a relevant step for the purposes of Part 7A
of ITEPA 2003 if—

(a) P has made a loan, or a quasi-loan, to a relevant person,

(b) 10the loan or quasi-loan was made on or after 6 April 1999, and

(c) an amount of the loan or quasi-loan is outstanding immediately
before the end of 5 April 2019.

(2) P is treated as taking the step immediately before—

(a) the end of the approved repayment date, if P has made a loan which
15is an approved fixed term loan on 5 April 2019, or

(b) the end of 5 April 2019, in any other case.

(3) Where P is treated by this paragraph as taking a relevant step, references to
“the relevant step” in section 554A(1)(e)(i) and (ii) of ITEPA 2003 have effect
as if they were references to the step of making the loan or, as the case may
20be, quasi-loan.

(4) For the purposes of section 554Z3(1) of ITEPA 2003 (value of relevant step),
the step is to be treated as involving a sum of money equal to the amount of
the loan or quasi-loan that is outstanding at the time P is treated as taking
the step.

(5) 25Subsections (2) and (3) of section 554C of ITEPA 2003 (“relevant person”)
apply for the purposes of this Schedule as they apply for the purposes of that
section.

(6) Sub-paragraph (1) is subject to paragraphs 23 and 24 (accelerated payments).

(7) For the purposes of this paragraph, whether an amount of a loan or quasi-
30loan is outstanding at a particular time—

(a) is to be determined in accordance with the following provisions of
this Schedule, and

(b) does not depend on the loan or quasi-loan subsisting at that time.

(8) References in this Schedule and in Part 7A of ITEPA 2003 to a relevant step
35within paragraph 1 of this Schedule are to be read as references to a relevant
step which a person is treated by this paragraph as taking.

Meaning of “loan”, “quasi-loan” and “approved repayment date”

2 (1) In this Part of this Schedule “loan” includes—

(a) any form of credit;

(b) 40a payment that is purported to be made by way of a loan.

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(2) For the purposes of paragraph 1, P makes a “quasi-loan” to a relevant person
if (and when) P acquires a right (the “acquired debt”)—

(a) which is a right to a payment or a transfer of assets, and

(b) in respect of which the condition in sub-paragraph (3) is met.

(3) 5The condition is met in relation to a right if there is a connection (direct or
indirect) between the acquisition of the right and—

(a) a payment made, by way of a loan or otherwise, to the relevant
person, or

(b) a transfer of assets to the relevant person.

(4) 10Where a quasi-loan or a loan made by P to a relevant person is replaced,
directly or indirectly, by a loan or another loan (the “replacement loan”),
references in paragraph 1 to the loan are references to the replacement loan.

(5) Where a loan or a quasi-loan made by P to a relevant person is replaced,
directly or indirectly, by a quasi-loan or another quasi-loan (the
15“replacement quasi-loan”), references in paragraph 1 to the quasi-loan are
references to the replacement quasi-loan.

(6) In this Part of this Schedule, “approved repayment date”, in relation to an
approved fixed term loan, means the date by which, under the terms of the
loan at the time of making the application for approval under paragraph 20,
20the whole of the loan must be repaid.

Meaning of “outstanding”: loans

3 (1) An amount of a loan is “outstanding” for the purposes of paragraph 1 if the
relevant principal amount exceeds the repayment amount.

(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan,
25means the total of—

(a) the initial principal amount lent, and

(b) any sums that have become principal under the loan, otherwise than
by capitalisation of interest.

(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the
30total of—

(a) the amount of principal under the loan that has been repaid before
17 March 2016, and

(b) payments in money made by the relevant person on or after 17
March 2016 by way of repayment of principal under the loan.

4 (1) 35A payment is to be disregarded for the purposes of paragraph 3(3)(b) if—

(a) there is any connection (direct or indirect) between the payment and
a tax avoidance arrangement (other than the arrangement under
which the loan was made), or

(b) the payment, or a sum or asset directly or indirectly representing the
40payment, is the subject of a relevant step (as defined in section
554A(2) of ITEPA 2003) that is taken—

(i) after the payment is made, but

(ii) before the end of the relevant date.

(2) But a payment is not to be disregarded under sub-paragraph (1)(b) if, by the
45end of the relevant date, each relevant tax liability has been paid in full.

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(3) For the purposes of this paragraph, each of the following is a “relevant tax
liability”—

(a) any liability for income tax arising by virtue of the application of
Chapter 2 by reason of the relevant step mentioned in sub-paragraph
5(1)(b), and

(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings)
applies because that relevant step gives rise to relevant earnings for
the purposes of that section, any liability for income tax in respect of
those relevant earnings.

(4) 10In this paragraph, “relevant date” means—

(a) the approved repayment date, if P has made a loan which is an
approved fixed term loan on 5 April 2019, or

(b) 5 April 2019, in any other case.

(5) Sub-paragraph (6) applies if a payment is disregarded under sub-paragraph
15(1)(b).

(6) The value of the relevant step treated as taken by paragraph 1 is not reduced
under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject
to earlier tax liability) by the amount of the sum, or the value of the asset,
which is the subject of the relevant step mentioned in sub-paragraph (1)(b)
20unless the payment condition is met by reason of section 554Z5(4)(a) and
(b)(ii) being met.

5 (1) This paragraph applies where—

(a) a person (“P”) has made a loan to a relevant person,