Finance Bill (HC Bill 116)

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).

(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

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.

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

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

(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

(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

(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—

(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

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

(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.