Finance Bill (HC Bill 102)

Finance BillPage 40

“Authorised investment fund” has the same meaning as in the
Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/
964).

Regulation 9A of the Authorised Investment Funds (Tax)
5Regulations 2006 (genuine diversity of ownership) applies for this
purpose.

Exempt unauthorised unit trusts

G The trustees of an exempt unauthorised unit trust, where the trust
meets the genuine diversity of ownership condition throughout
10the accounting period of the trust in which the disposal is made.

Regulation 9A of the Authorised Investment Funds (Tax)
Regulations 2006 (genuine diversity of ownership) applies for this
purpose (treating references to an authorised investment fund as
including an exempt unauthorised unit trust).

(2) 15The Treasury may by regulations amend this Schedule so as to add
or remove a person as a “qualifying institutional investor” (and may
in particular do so by changing the conditions subject to which a
person is a qualifying institutional investor).”

“Exempt unauthorised unit trust 20 paragraph 3B(7)
“Qualifying institutional investor paragraph 30A”.

(7) The amendments made by this section have effect in relation to disposals made
on or after 1 April 2017.

Domicile, overseas property etc

29 25Deemed domicile: income tax and capital gains tax

(1) In Chapter 2A of Part 14 of ITA 2007 (income tax liability: domicile), after
section 835B insert—

835BA Deemed domicile

(1) This section has effect for the purposes of the provisions of the Income
30Tax Acts or TCGA 1992 which apply this section.

(2) An individual not domiciled in the United Kingdom at a time in a tax
year (“the relevant tax year”) is to be regarded as domiciled in the
United Kingdom at that time if—

(a) condition A is met, or

(b) 35condition B is met.

(3) Condition A is that—

(a) the individual was born in the United Kingdom,

(b) the individual’s domicile of origin was in the United Kingdom,
and

(c) 40the individual is UK resident for the relevant tax year.

Finance BillPage 41

(4) Condition B is that the individual has been UK resident for at least 15
of the 20 tax years immediately preceding the relevant tax year.

(5) But Condition B is not met if—

(a) the individual is not UK resident for the relevant tax year, and

(b) 5there is no tax year beginning after 5 April 2017 and preceding
the relevant tax year in which the individual was UK resident.”

(2) Schedule 8 contains—

(a) provision applying section 835BA of ITA 2007, and

(b) further provision relating to this section.

30 10Deemed domicile: inheritance tax

(1) In section 267 of IHTA 1984 (persons treated as domiciled in the United
Kingdom), in subsection (1)—

(a) in paragraph (a), omit the final “or”;

(b) after that paragraph insert—

(aa) 15he is a formerly domiciled resident for the tax year in
which the relevant time falls (“the relevant tax year”),
or”;

(c) for paragraph (b) substitute—

(b) he was resident in the United Kingdom—

(i) 20for at least fifteen of the twenty tax years
immediately preceding the relevant tax year,
and

(ii) for at least one of the four tax years ending with
the relevant tax year.”

(2) 25In that section, omit subsection (3).

(3) In that section, in subsection (4), for “in any year of assessment” substitute “for
any tax year”.

(4) In section 48 of that Act (settlements: excluded property)—

(a) in subsection (3)(b), for “and (3D)” substitute “to (3E)”;

(b) 30in subsection (3A)(b), for “subsection (3B)” substitute “subsections (3B)
and (3E)”;

(c) after subsection (3D) insert—

(3E) In a case where the settlor of property comprised in a settlement
is not domiciled in the United Kingdom at the time the
35settlement is made, the property is not excluded property by
virtue of subsection (3) or (3A) above at any time in a tax year if
the settlor was a formerly domiciled resident for that tax year.”

(5) In section 64 of that Act (charge at ten-year anniversary), in subsection (1B),
after “was made” insert “and is not a formerly domiciled resident for the tax
40year in which the ten-year anniversary falls”.

(6) In section 65 of that Act (charge at other times), after subsection (7A) insert—

(7B) Tax shall not be charged under this section by reason only that property
comprised in a settlement becomes excluded property by virtue of
section 48(3E) ceasing to apply in relation to it.”

Finance BillPage 42

(7) In section 82 of that Act (excluded property)—

(a) for subsection (1) substitute—

(1) In a case where, apart from this section, property to which
section 80 or 81 applies would be excluded property by virtue
5of section 48(3)(a) above, that property shall not be taken to be
excluded property at any time (“the relevant time”) for the
purposes of this Chapter (except sections 78 and 79) unless
Conditions A and B are satisfied.”;

(b) in subsection (2), for “the condition in subsection (3) below” substitute
10“Condition A”;

(c) in subsection (3), for “The condition” substitute “Condition A”;

(d) after subsection (3) insert—

(4) Condition B referred to in subsection (1) above is—

(a) in the case of property to which section 80 above applies,
15that the person who is the settlor in relation to the
settlement first mentioned in that section, and

(b) in the case of property to which subsection (1) or (2) of
section 81 above applies, that the person who is the
settlor in relation to the first or second of the settlements
20mentioned in that subsection,

was not a formerly domiciled resident for the tax year in which
the relevant time falls.”

(8) In section 272 of that Act (interpretation)—

(a) for the definition of “foreign-owned” substitute—

  • 25““foreign-owned”, in relation to property at any time,
    means property—

    (a)

    in the case of which the person beneficially
    entitled to it is at that time domiciled outside the
    United Kingdom, or

    (b)

    30if the property is comprised in a settlement, in
    the case of which the settlor—

    (i)

    is not a formerly domiciled resident for
    the tax year in which that time falls, and

    (ii)

    was domiciled outside the United
    35Kingdom when the property became
    comprised in the settlement;”;

(b) at the appropriate place insert—

  • ““formerly domiciled resident”, in relation to a tax year,
    means a person—

    (a)

    40who was born in the United Kingdom,

    (b)

    whose domicile of origin was in the United
    Kingdom,

    (c)

    who was resident in the United Kingdom for
    that tax year, and

    (d)

    45who was resident in the United Kingdom for at
    least one of the two tax years immediately
    preceding that tax year;”.

(9) The amendments made by this section have effect in relation to times after 5
April 2017, subject to subsections (10) to (12).

Finance BillPage 43

(10) The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) does
not have effect in relation to a person if—

(a) the person is not resident in the United Kingdom for the relevant tax
year, and

(b) 5there is no tax year beginning after 5 April 2017 and preceding the
relevant tax year in which the person was resident in the United
Kingdom.

In this subsection “relevant tax year” is to be construed in accordance with
section 267(1) of IHTA 1984 as amended by subsection (1).

(11) 10The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) also
does not have effect in determining—

(a) whether settled property which became comprised in the settlement on
or before that date is excluded property for the purposes of IHTA 1984;

(b) the settlor’s domicile for the purposes of section 65(8) of that Act in
15relation to settled property which became comprised in the settlement
on or before that date;

(c) whether, for the purpose of section 65(8) of that Act, the condition in
section 82(3) of that Act is satisfied in relation to such settled property.

(12) Despite subsection (2), section 267(1) of IHTA 1984, as originally enacted, shall
20continue to be disregarded in determining—

(a) whether settled property which became comprised in the settlement on
or before 9 December 1974 is excluded property for the purposes of
IHTA 1984;

(b) the settlor’s domicile for the purposes of section 65(8) of that Act in
25relation to settled property which became comprised in the settlement
on or before that date;

(c) whether, for the purpose of section 65(8) of that Act, the condition in
section 82(3) of that Act is satisfied in relation to such settled property.

(13) Subsections (14) and (15) apply if an amount of inheritance tax—

(a) 30would not be charged but for the amendments made by this section, or

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

(14) 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
35of subsection (1) of that section, to the end of the period mentioned in
paragraph (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.

(15) 40Subsection (1) of section 234 of IHTA 1984 (cases where inheritance tax payable
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) 45if later, the end of the month immediately following the month in
which this Act is passed.

(16) Subsection (17) applies if—

Finance BillPage 44

(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
amount of inheritance tax charged on an occasion, and

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

(i) 5no inheritance tax would be charged on that occasion, or

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

(17) Section 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
10the 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) the expiration of that period, or

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

31 15Settlements and transfer of assets abroad: value of benefits

Schedule 9 makes provision about the value of benefits received in relation to
settlements and the transfer of assets abroad.

32 Exemption from attribution of carried interest gains

(1) TCGA 1992 is amended as follows.

(2) 20In section 13(1A) (attribution of gains to members of non-resident
companies)—

(a) omit the “or” at the end of paragraph (a), and

(b) at the end of paragraph (b), insert , or

(c) a chargeable gain treated as accruing under section
25103KA(2) or (3) (carried interest gains).”

(3) In section 86 (attribution of gains to settlors with interest in non-resident or
dual resident settlements), after subsection (4ZA) insert—

(4ZB) Where (apart from this subsection) the amount mentioned in
subsection (1)(e) would include an amount of chargeable gains treated
30as accruing under section 103KA(2) or (3) (carried interest gains), the
amount of the gains is to be disregarded for the purposes of subsection
(1)(e).”

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

(5B) 35Where (apart from this subsection) the amount mentioned in
subsection (4)(a) would include an amount of chargeable gains treated
as accruing under section 103KA(2) or (3) (carried interest gains), the
amount of the gains is to be disregarded for the purposes of
determining the section 2(2) amount.”

(5) 40The amendments made by this section have effect in relation to chargeable
gains treated as accruing under section 103KA(2) or (3) of TCGA 1992 at any
time before, as well as after, the passing of this Act.

Finance BillPage 45

33 Inheritance tax on overseas property representing UK residential property

Schedule 10 makes provision about the extent to which overseas property is
excluded property for the purposes of inheritance tax, in cases where the value
of the overseas property is attributable to residential property in the United
5Kingdom.

Disguised remuneration

34 Employment income provided through third parties

(1) In section 554XA of ITEPA 2003 (employment income provided through third
parties: exclusion for payments in respect of a tax liability), in subsection (2),
10omit paragraphs (a) and (b).

(2) The amendment made by subsection (1) has effect in relation to relevant steps
taken on or after 21 July 2017.

(3) Schedule 11 makes provision about the application of Part 7A of ITEPA 2003 in
relation to loans and quasi-loans that are outstanding on 5 April 2019.

35 15Trading income provided through third parties

(1) ITTOIA 2005 is amended as follows.

(2) After section 23 insert—

“Trading income provided through third parties
23A Application of section 23E: conditions

(1) 20Section 23E (tax treatment of relevant benefits) applies if Conditions A
to E are met.

(2) Condition A is that a person (“T”) is or has been carrying on a trade (the
“relevant trade”) alone or in partnership.

(3) Condition B is that—

(a) 25there is an arrangement (“the arrangement”) in connection with
the relevant trade to which T is a party or which otherwise
(wholly or partly) covers or relates to T, and

(b) it is reasonable to suppose that, in essence—

(i) the arrangement, or

(ii) 30the arrangement so far as it covers or relates to T,

is (wholly or partly) a means of providing, or is otherwise
concerned with the provision of, relevant benefits.

(4) Condition C is that—

(a) a relevant benefit arises to T, or a person who is or has been
35connected with T, in pursuance of the arrangement, or

(b) a relevant benefit arises to any other person in pursuance of the
arrangement and any of the enjoyment conditions (see section
23F) is met in relation to the relevant benefit.

(5) Condition D is that it is reasonable to suppose that the relevant benefit
40(directly or indirectly) represents, or has arisen or derives from, or is

Finance BillPage 46

otherwise connected with, the whole or part of a qualifying third party
payment.

(6) Condition E is that it is reasonable to suppose that a tax advantage
would be obtained by T, or a person who is or has been connected with
5T, as a result of the arrangement.

(7) For the purposes of subsection (3) in particular, all relevant
circumstances are to be taken into account in order to get to the essence
of the matter.

(8) In this section and sections 23B to 23H, “this group of sections” means
10this section and those sections.

(9) The provisions of this group of sections apply to professions and
vocations as they apply to trades.

(10) See Schedule 12 to FA (No.2) 2017 for provision about the application
of this group of sections in relation to loans and quasi-loans that are
15outstanding on 5 April 2019.

23B Meaning of “relevant benefit”

(1) The following provisions apply for the purposes of this group of
sections.

(2) “Relevant benefit” means any payment (including a payment by way of
20a loan), a transfer of money’s worth, or any other benefit.

(3) The assumption of a liability of T by another person is to be treated as
the provision of a relevant benefit to T.

(4) The assumption, by a person other than T, of a liability of a person (“C”)
who is or has been connected with T, is to be treated as the provision of
25a relevant benefit to C.

(5) “Loan” includes—

(a) any form of credit;

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

23C Meaning of “qualifying third party payment”

(1) 30The following provisions apply for the purposes of this group of
sections.

(2) A payment is a “third party payment” if it is made (by T or another
person) to—

(a) T acting as trustee, or

(b) 35any person other than T.

(3) A third party payment is a “qualifying third party payment” if the
deduction condition or the trade connection condition is met in relation
to the payment.

(4) The “deduction condition” is met in relation to a payment if—

(a) 40a deduction for the payment is made in calculating the profits of
the relevant trade, or

(b) where the relevant trade is or has been carried on in
partnership, a deduction for the payment is made in calculating

Finance BillPage 47

the amount on which T is liable to income tax in respect of the
profits of the trade.

(5) The “trade connection condition” is met in relation to a payment if it is
reasonable to suppose that in essence—

(a) 5the payment is by way of consideration for goods or services
provided in the course of the relevant trade, or

(b) there is some other connection (direct or indirect) between the
payment and the provision of goods or services in the course of
the relevant trade.

(6) 10For the purposes of subsection (5) in particular, all relevant
circumstances are to be taken into account in order to get to the essence
of the matter.

23D Other definitions

(1) The following provisions apply for the purposes of this group of
15sections.

(2) “Arrangement” includes any agreement, understanding, scheme,
settlement, trust, transaction or series of transactions (whether or not
legally enforceable).

(3) A “tax advantage” includes—

(a) 20relief 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
tax,

(d) avoidance of a possible assessment to tax,

(e) 25deferral of a payment of tax or advancement of a repayment of
tax, and

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

(4) Section 993 of ITA 2007 (meaning of “connected” persons) applies for
the purposes of this group of sections as if subsection (4) of that section
30993 were omitted.

23E Tax treatment of relevant benefits

(1) Where this section applies (see section 23A), the relevant benefit
amount is to be treated for income tax purposes as profits of the
relevant trade for—

(a) 35the tax year in which the relevant benefit arises, or

(b) if T has ceased to carry on the relevant trade in a tax year (the
“earlier tax year”) before the tax year referred to in paragraph
(a), the earlier tax year.

(2) For the purposes of this section, “the relevant benefit amount” means—

(a) 40if the relevant benefit is a payment otherwise than by way of a
loan, an amount equal to the amount of the payment,

(b) if the relevant benefit is a payment by way of loan, an amount
equal to the principal amount lent, or

(c) in any other case, an amount equal to the value of the relevant
45benefit.

(3) For the purposes of subsection(2)(c), the value of a relevant benefit is—

Finance BillPage 48

(a) its market value at the time it arises, or

(b) if higher, the cost of providing it.

(4) In subsection (3) “market value” has the same meaning as it has for the
purposes of TCGA 1992 by virtue of Part 8 of that Act.

23F 5Relevant benefits: persons other than T

(1) For the purposes of section 23A(4), the enjoyment conditions are—

(a) that the relevant benefit, or part of it, is in fact so dealt with by
any person as to be calculated at some time to enure for the
benefit of T;

(b) 10that the arising of the relevant benefit operates to increase the
value to T of any assets—

(i) which T holds, or

(ii) which are held for the benefit of T;

(c) that T receives, or is entitled to receive, at any time any benefit
15provided or to be provided out of, or deriving or to be derived
from, the relevant benefit (or part of it);

(d) where the relevant benefit is the payment of a sum of money
(including a payment by way of loan), that T may become
entitled to the beneficial enjoyment of the sum or part of the
20sum if one or more powers are exercised or successively
exercised (and for these purposes it does not matter who may
exercise the powers or whether they are exercisable with or
without the consent of another person);

(e) where the relevant benefit is the payment of a sum of money
25(including a payment by way of loan), that T is able in any
manner to control directly or indirectly the application of the
sum or part of the sum.

(2) Where an enjoyment condition is met in relation to part only of a
relevant benefit, that part is to be treated as a separate benefit for the
30purposes of section 23A(4).

(3) In subsection (1) references to T include references to a person who is
or has been connected with T.

(4) In determining whether any of the enjoyment conditions is met in
relation to a relevant benefit, regard must be had to the substantial
35result and effect of all the relevant circumstances.

23G Anti-avoidance

(1) In determining whether section 23E applies in relation to a relevant
benefit, no regard is to be had to any arrangements the main purpose,
or one of the main purposes, of which is to secure that section 23E does
40not apply in relation to the whole, or any part, of—

(a) the relevant benefit, or

(b) the relevant benefit and one or more other relevant benefits
(whether or not all arising to the same person).

(2) Where arrangements are disregarded under subsection (1), and a
45relevant benefit (or part of it)—

(a) would, if the arrangements were not disregarded, arise before 6
April 2017, but

Finance BillPage 49

(b) would, when the arrangements are disregarded, arise on or
after that date,

the relevant benefit (or part) is to be regarded for the purposes of this
group of sections as arising on the date on which it would arise apart
5from the arrangements.

23H Double taxation

(1) This section applies where—

(a) income tax is charged on an individual by virtue of the
application of section 23E in relation to a relevant benefit
10amount, and

(b) at any time, a tax (whether income tax or another tax) is charged
on the individual or another person otherwise than by virtue of
the application of section 23E in relation to the relevant benefit
concerned.

(2) 15In order to avoid a double charge to tax, the individual may make a
claim for one or more consequential adjustments to be made in respect
of the tax charged as mentioned in subsection (1)(b).

(3) On a claim under this section an officer of Revenue and Customs must
make such of the consequential adjustments claimed (if any) as are just
20and reasonable.

(4) The value of any consequential adjustments must not exceed the lesser
of—

(a) the income tax charged on the individual as mentioned in
subsection (1)(a), and

(b) 25the tax charged as mentioned in subsection (1)(b).

(5) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the
amendment of a claim, or otherwise, and

(c) 30despite any time limit imposed by or under any enactment.”

(3) In section 7(2) (income charged: profits of a tax year) at the end insert
“(including amounts treated as profits of the tax year under section 23E(1)).”

(4) The amendments made by this section have effect in relation to relevant
benefits arising on or after 6 April 2017.

(5) 35Schedule 12 contains provision about the application of new sections 23A to
23H of ITTOIA 2005 in relation to loans and quasi-loans that are outstanding
on 5 April 2019.

36 Disguised remuneration schemes: restriction of income tax relief

(1) Section 38 of ITTOIA 2005 (restriction of deductions: employee benefit
40contributions) is amended in accordance with subsections (2) to (5).

(2) After subsection (1) insert—

(1A) No deduction is allowed under this section in respect of employee
benefit contributions for a period of account which starts more than 5