Finance (No. 2) Bill (HC Bill 134)

Finance (No. 2) BillPage 160

(i) at the distribution time, or at any later time in the 3
years beginning with the start time, or

(ii) at any time before the distribution time and, it is
reasonable to assume, in anticipation of receipt of the
5benefit mentioned in paragraph (b)(ii),

(e) the gift is of or includes—

(i) the whole or part of the benefit mentioned in
paragraph (b)(ii),

(ii) anything that (wholly or in part, and directly or
10indirectly) derives from, or represents, the whole or
part of that benefit, or

(iii) any other property, but only if the benefit mentioned
in paragraph (b)(ii) is provided with a view to
enabling or facilitating, or otherwise in connection
15with, the making of the gift of the property to the
subsequent recipient,

(f) except where an individual is liable as a result of section
733A(2) or (3) for the tax charged under section 731 on the
amount mentioned in paragraph (a), either—

(i) 20the original beneficiary is non-UK resident for the
arising year, or

(ii) section 809B or 809D or 809E (remittance basis)
applies to the original beneficiary for the arising year
and none of the amount mentioned in paragraph (a)
25is relevantly remitted before the end of the charging
year, and

(g) where an individual is liable as a result of section 733A(2) or
(3) for the tax charged under section 731 on the amount
mentioned in paragraph (a), section 809B or 809D or 809E
30applies to that individual for the arising year and none of the
amount mentioned in paragraph (a) is relevantly remitted
before the end of the charging year.

(2) If—

(a) the amount mentioned in subsection (1)(a) is not treated as
35arising by section 733D (and neither by section 733C nor by
section 733E),

(b) except where an individual is liable as a result of section
733A(2) or (3) for the tax charged under section 731 on that
amount, section 809B or 809D or 809E applies to the original
40beneficiary for the arising year,

(c) where an individual is liable as a result of section 733A(2) or
(3) for the tax charged under section 731 on that amount,
section 809B or 809D or 809E applies to that individual for the
arising year, and

(d) 45part only of that amount is relevantly remitted before the end
of the charging year,

subsection (1)(a) is to be treated as referring instead only to the
remainder of that amount.

(3) The original beneficiary is not liable to tax for any year after the
50charging year on so much of the amount mentioned in subsection
(1)(a) as is—

Finance (No. 2) BillPage 161

(a) treated as arising to the subsequent recipient by section 733C,
or

(b) treated as arising to the settlor by section 733E;

and the settlor is not is liable under section 733A(2) or (3) to tax for
5any year after the charging year on so much of the amount
mentioned in subsection (1)(a) as is treated as arising to the
subsequent recipient by section 733C.

(4) For the purposes of subsection (1)(d)(i)—

(a) if the amount mentioned in subsection (1)(a) is not one that is
10treated as arising by section 733D, “the start time” is the time
the benefit mentioned in subsection (1)(b) is provided to the
original beneficiary, and

(b) if the amount mentioned in subsection (1)(a) is one that is
treated as arising by section 733D in connection with the
15operation of this section on a previous occasion, “the start
time” is the time given by this subsection as the start time on
that occasion.

(5) Where the onward payment is made as mentioned in subsection
(1)(d)(ii), the onward payment is to be treated—

(a) 20for the purposes of the provisions of this section following
subsection (1)(d), and

(b) for the purposes of sections 733C to 733E,

as made immediately after, and in the tax year containing, the
distribution time.

(6) 25Where subsection (1)(d) and (e) are met in any case, it is to be
presumed (unless the contrary is shown) that subsection (1)(c) is also
met in that case.

(7) In this section—

  • “arrangements” includes any agreement, understanding,
    30scheme, transaction or series of transactions (whether or not
    legally enforceable),

  • “the charging year” means the gift year or, if later, the matching
    year,

  • “gift” includes any benefit,

  • 35“the gift year” means the tax year in which the onward payment
    is made, but see subsection (5),

  • “make”, in relation to a gift that is a benefit, means provide,

  • “the matching year” means the first tax year in which the
    matching mentioned in subsection (1)(b) would occur,

  • 40“relevantly remitted” means remitted to the United Kingdom in
    a tax year for which the original beneficiary is UK resident
    but, where an individual is liable as a result of section 733A(2)
    or (3) for the tax charged under section 731 on the amount
    mentioned in subsection (1)(a), means remitted to the United
    45Kingdom in a tax year for which that individual is UK
    resident, and

  • “the settlor” means the settlor of the settlement, mentioned in
    section 721A(3) or (4) or 729A(3) or (4), which because of
    subsection (1)(b)(i) is the settlement concerned.

Finance (No. 2) BillPage 162

(8) Sections 742C to 742E (value of benefit provided to a person) apply
in relation to the onward payment as if references in those sections to
a benefit provided were references to a gift made.

(9) Sections 809L to 809Z6 (remittance basis: rules about when income is
5remitted, including rule treating pre-arising remittances of deemed
income as made when the income arises)—

(a) apply for the purposes of this section and sections 733C to
733E, and

(b) apply for those purposes in relation to references to
10remittance of the onward payment as if the onward payment
were relevant foreign income of the subsequent recipient.

733C Cases where income treated as arising to recipient of onward gift

(1) Subsection (3) applies if—

(a) this section applies (see section 733B(1)), and

(b) 15the subsequent recipient is UK resident for the gift year, and

(c) the subsequent recipient is UK resident for the matching year
if that is later than the gift year, and

(d) none of sections 809B, 809D and 809E applies to the
subsequent recipient for the charging year.

(2) 20Subsection (3) also applies if—

(a) this section applies (see section 733B(1)), and

(b) the subsequent recipient is UK resident for the gift year, and

(c) the subsequent recipient is UK resident for the matching year
if that is later than the gift year, and

(d) 25section 809B, 809D or 809E applies to the subsequent
recipient for the charging year, and

(e) the whole, or part only, of the onward payment is remitted to
the United Kingdom in the charging year.

(3) Section 731 has effect—

(a) 30as if the subsequent recipient were an individual to whom
income is treated as arising under section 732 for the charging
year, and

(b) as if, subject to subsection (4), the amount of that income—

(i) were equal to the amount or value of so much of the
35onward payment as is within any of sub-paragraphs
(i) to (iii) of section 733B(1)(e), or

(ii) were, where this subsection applies because of
subsection (2) and part only of that much of the
onward payment is remitted to the United Kingdom
40in the charging year, equal to the amount or value of
that part.

(4) The amount given by subsection (3) (before adjustment under this
subsection) is to be adjusted as follows—

(a) deduct any part of the amount on which the subsequent
45recipient is liable to income tax otherwise than under this
section, and

Finance (No. 2) BillPage 163

(b) if following any adjustment under paragraph (a) the amount
exceeds the amount mentioned in section 733B(1)(a), deduct
the excess.

733D Cases where deemed income attributed to recipient of onward gift

(1) 5Subsection (3) applies if this section applies (see section 733B(1))
and—

(a) the subsequent recipient is non-UK resident for the gift year,
or

(b) the matching year is later than the gift year and the
10subsequent recipient is UK resident for the gift year but non-
UK resident for the matching year.

(2) Subsection (3) also applies if—

(a) this section applies (see section 733B(1)), and

(b) the subsequent recipient is UK resident for the gift year, and

(c) 15the subsequent recipient is UK resident for the matching year
if that is later than the gift year, and

(d) section 809B, 809D or 809E applies to the subsequent
recipient for the charging year, and

(e) none, or part only, of the onward payment is remitted to the
20United Kingdom in the charging year.

(3) Section 733B(1)(a) has effect—

(a) as if the subsequent recipient were an individual to whom
income is treated as arising under section 732 for the charging
year, and

(b) 25as if, subject to subsection (4), the amount of that income—

(i) were equal to the amount or value of so much of the
onward payment as is within any of sub-paragraphs
(i) to (iii) of section 733B(1)(e) and is not treated as
arising to someone other than the subsequent
30recipient as a result of the operation of section 733E,
or

(ii) were, where this subsection applies because of
subsection (2) and part only of that much of the
onward payment is remitted to the United Kingdom
35in the charging year, equal to the amount or value of
the remainder of that much of the onward payment.

(4) The amount given by subsection (3) (before adjustment under this
subsection) is to be adjusted as follows: if that amount exceeds the
amount mentioned in section 733B(1)(a) in the case of the original
40beneficiary, deduct the excess.

(5) Where the amount mentioned in section 733B(1)(a) is one treated as
arising by this section in connection with the operation of section
733B and this section on a previous occasion, section 733B(1) has
effect—

(a) 45with the omission of its paragraphs (b) and (c),

(b) as if the reference in its paragraph (d) to the benefit
mentioned in its paragraph (b)(ii) were, instead, to what was
the onward payment on that previous occasion,

Finance (No. 2) BillPage 164

(c) as if the references in its paragraph (d) to the distribution
time were, instead, to the time when that onward payment
was made, and

(d) as if the references in its paragraph (e) to the benefit
5mentioned in its paragraph (b)(ii) were, instead, to so much
of that onward payment as was on that previous occasion
within any of sub-paragraphs (i) to (iii) of its paragraph (e).

733E Cases where settlor liable following onward gift

(1) Subsection (3) applies if—

(a) 10this section applies (see section 733B(1)),

(b) the subsequent recipient is a close member of the settlor’s
family when the onward payment is made,

(c) the subsequent recipient is UK resident for the charging year,

(d) section 809B, 809D or 809E applies to the subsequent
15recipient for the charging year,

(e) none, or part only, of the onward payment is remitted to the
United Kingdom in the charging year,

(f) there is a time in the charging year when the settlor is UK
resident,

(g) 20there is no time in the charging year when the settlor is
domiciled in the United Kingdom, and

(h) there is no time in the charging year when the settlor is
regarded for the purposes of section 718(1)(b) as domiciled in
the United Kingdom as a result of section 835BA having
25effect because of Condition A in that section being met.

(2) Subsection (3) also applies if—

(a) this section applies (see section 733B(1)),

(b) the subsequent recipient is a close member of the settlor’s
family when the onward payment is made,

(c) 30the subsequent recipient is non-UK resident for the charging
year,

(d) there is a time in the charging year when the settlor is UK
resident,

(e) there is no time in the charging year when the settlor is
35domiciled in the United Kingdom, and

(f) there is no time in the charging year when the settlor is
regarded for the purposes of section 718(1)(b) as domiciled in
the United Kingdom as a result of section 835BA having
effect because of Condition A in that section being met.

(3) 40Section 731 applies—

(a) as if the settlor were an individual to whom income is treated
as arising under section 732 for the charging year, and

(b) as if, subject to subsection (4), the amount of that income—

(i) were equal to the amount or value of so much of the
45onward payment as is within any of sub-paragraphs
(i) to (iii) of section 733B(1)(e), or

(ii) were, where this subsection applies because of
subsection (1) in a case where part only of that much
of the onward payment is remitted to the United

Finance (No. 2) BillPage 165

Kingdom in the charging year, equal to the amount or
value of the remainder of that much of the onward
payment.

(4) The amount given by subsection (3)(b) (before adjustment under this
5subsection) is to be adjusted as follows—

(a) deduct any part of the amount on which the settlor is liable to
income tax otherwise than under this section, and

(b) if following any adjustment under paragraph (a) the amount
exceeds the amount mentioned in section 733B(1)(a), deduct
10the excess.

(5) Where any tax for which the settlor is liable as a result of subsections
(3) and (4) is paid, the settlor is entitled to recover the amount of the
tax from the subsequent recipient.

(6) For the purpose of recovering that amount, the settlor is entitled to
15require an officer of Revenue and Customs to give the settlor a
certificate specifying—

(a) the amount of the income concerned, and

(b) the amount of tax paid,

and any such certificate is conclusive evidence of the facts stated in it.

(7) 20In this section—

(a) “the settlor” means the settlor of the settlement, mentioned in
section 721A(3) or (4) or 729A(3) or (4), which because of
section 733B(1)(b)(i) is the settlement concerned, and

(b) “close member”, in relation to the family of the settlor, is to be
25read in accordance with section 733A(7) and (8).”

17 In section 734 (amount charged under section 731 is reduced by prior
gains)—

(a) in subsection (1) omit paragraphs (b) and (c), but not the “and” at the
end of paragraph (c),

(b) 30for subsection (1)(d) substitute—

(d) chargeable gains are treated by section 87, 87K, 87L or
89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992
as accruing to a person in that or a subsequent tax
year by reference (direct or indirect) to the whole or
35part of any benefits so provided.”, and

(c) in subsection (4)—

(i) for “and “the available relevant income” have” substitute
“has”, and

(ii) for “Steps 2 and 5” substitute “Step 2”.

18 40After section 734 insert—

734A Reduction in amount charged: previous settlements charge

(1) This section applies if—

(a) benefits provided as mentioned in section 732(1)(c) are
received in a tax year, and

(b) 45income is treated by section 643A, 643J or 643L of ITTOIA
2005 as arising to a person in that or a subsequent tax year by

Finance (No. 2) BillPage 166

reference (direct or indirect) to the whole or part of any
benefits so provided.

(2) For any tax year after one in which such income is so treated, the
amount of income treated as arising to the individual under section
5732(2) in respect of benefits provided as mentioned in section
732(1)(c) as a result of the transfer or operations in question is
calculated as follows.

(3) The amount is calculated under section 733(1) as if the total untaxed
benefits were reduced by the amount of that income.

(4) 10In this section “the total untaxed benefits” has the same meaning as
in section 733(1) (see Step 2).”

19 After section 735B insert—

735C Person liable under section 733C or 733E and remittance basis applies

(1) This section applies in relation to income if—

(a) 15the income is treated as arising to an individual for a tax
year—

(i) as a result of the operation of section 733C(3) and (4)
where section 733C(3) applies because of section
733C(2), or

(ii) 20as a result of the operation of section 733E, and

(b) section 809B, 809D or 809E (remittance basis) applies to the
individual for that year.

(2) The income is treated as relevant foreign income of the individual.

(3) For the purposes of Chapter A1 of Part 14 (remittance basis) treat the
25onward payment, or (as the case may be) the part of it whose amount
or value is equal to the amount of the income, as deriving from the
income.

(4) In the application of section 832 of ITTOIA 2005 in relation to the
income, subsection (2) of that section has effect with the omission of
30its paragraph (b).”

Consequential amendments

20 (1) Section 97 of TCGA 1992 (settlements: supplementary provisions) is
amended as follows.

(2) In subsection (1)(a) (meaning of “capital payment”), for “not chargeable to
35income tax on the recipient or,” substitute neither—

chargeable to income tax on the recipient, nor

(ii) chargeable to income tax on another person under
any of sections 643A, 643J and 643L of ITTOIA 2005
and sections 733A, 733C and 733E of ITA 2007,

40or,”.

(3) In subsection (3) (cases where benefit may be treated as chargeable gain and
as income), for “section 733 of ITA 2007 treated as the recipient’s” substitute
“section 643A or 643J or 643L of ITTOIA 2005, or sections 731 to 733E of ITA
2007, treated as an individual’s”.

Finance (No. 2) BillPage 167

(4) In consequence of sub-paragraph (3), in Schedule 1 to ITA 2007 omit
paragraph 302.

(5) The references to section 733A of ITA 2007 that are inserted by sub-
paragraphs (2) and (3) include that section as it has effect for the tax year
52017-18.

Commencement etc of amendments in ITTOIA 2005 and ITA 2007

21 (1) Subject as follows, the amendments made by paragraphs 3 to 19 have effect
for the tax year 2018-19 and subsequent tax years.

(2) None of the references to an earlier tax year in Step 1 of the new section
10643B(1) of ITTOIA 2005, or in new section 643C(2) of ITTOIA 2005, includes
any tax year earlier than the tax year 2018-19 except that, in the phrase
“benefits provided by the trustees in the year or in an earlier tax year” in the
definition of “TOAA” in new section 643C(2) of ITTOIA 2005, the reference
to an earlier tax year does include tax years earlier than the tax year 2018-19.

(3) 15New sections 643I to 643L and 643N of ITTOIA 2005 have effect only in
relation to onward payments made on or after 6 April 2018.

(4) New section 643M of ITTOIA 2005, and new sections 733B to 733E and 735C
of ITA 2007, have effect only in relation to onward payments made on or
after 6 April 2018, but have effect in relation to an onward payment made on
20or after that date even where the onward payment is referable to a benefit
received before that date.

(5) The amendment in section 733A(7) of ITA 2007 made by paragraph 15 also
has effect for the tax year 2017-18.

22 The new section 643D(3) of ITTOIA 2005 is to be treated as inserted by the
25Treasury under the powers to make regulations conferred by section 354 of
TIOPA 2010.

Section 40

SCHEDULE 11 Stamp duty land tax: higher rates for additional dwellings

1 Schedule 4ZA to FA 2003 (stamp duty land tax: higher rates for additional
30dwellings and dwellings purchased by companies) is amended as follows.

Previous residence required to be disposed of entirely

2 (1) Paragraph 3 (single dwelling transactions: purchaser is an individual) is
amended as follows.

(2) In sub-paragraph (6)—

(a) 35after paragraph (b) insert—

(ba) immediately after the effective date of the previous
transaction, neither the purchaser nor the purchaser’s
spouse or civil partner had a major interest in the sold
dwelling,” and

(b) 40in paragraph (c) for “that period of three years” substitute “the
period of three years referred to in paragraph (b)”.

Finance (No. 2) BillPage 168

(3) After sub-paragraph (6) insert—

(6A) Sub-paragraph (6)(ba) does not apply in relation to a spouse or
civil partner of the purchaser if the two of them were not living
together (see paragraph 9(3)) on the effective date of the
5transaction concerned.”

(4) In sub-paragraph (7) after paragraph (b) (but before “and”) insert—

(ba) immediately after the effective date of that other land
transaction, neither the purchaser nor the purchaser’s
spouse or civil partner has a major interest in the sold
10dwelling,”.

(5) After sub-paragraph (7) insert—

(8) Sub-paragraph (7)(ba) does not apply in relation to a spouse or
civil partner of the purchaser if the two of them are not living
together (see paragraph 9(3)) on the effective date of that other
15land transaction.”

Exception where purchaser has prior interest in purchased dwelling

3 After paragraph 7 insert—

“Exception where purchaser has prior interest in purchased dwelling

7A (1) A chargeable transaction which would (but for this paragraph) fall
20within paragraph 3 or paragraph 6 does not fall within that
paragraph if—

(a) the purchaser had a major interest (“the prior interest”) in
the relevant purchased dwelling immediately before the
effective date of the transaction, and

(b) 25the relevant purchased dwelling had been the purchaser’s
only or main residence throughout the period of three
years ending with the effective date of the transaction.

(2) Sub-paragraph (1) does not apply if—

(a) the prior interest is a term of years absolute or a leasehold
30estate, and

(b) immediately before the effective date of the transaction,
the remaining term of the prior interest is less than 21
years.

(3) Sub-paragraph (1) does not apply if immediately before the
35effective date of the transaction—

(a) the purchaser is beneficially entitled as a joint tenant to the
prior interest, and

(b) there are more than three other joint tenants.

(4) Sub-paragraph (1) does not apply if immediately before the
40effective date of the transaction the purchaser is beneficially
entitled as a tenant in common or coparcener to less than a quarter
of the prior interest.

(5) In this paragraph “relevant purchased dwelling” means—

Finance (No. 2) BillPage 169

(a) the purchased dwelling mentioned in paragraph 3(1)(b), or
(as the case may be)

(b) the purchased dwelling which meets the conditions
mentioned in paragraph 6(1)(c).”

5Exception where spouses and civil partners purchasing from one another

4 After paragraph 9 insert—

“Spouses and civil partners purchasing from one another

9A (1) A chargeable transaction is not a higher rates transaction for the
purposes of paragraph 1 if—

(a) 10there is only one purchaser,

(b) there is only one vendor, and

(c) on the effective date of the transaction the two of them
are—

(i) married to, or civil partners of, each other, and

(ii) 15living together (see paragraph 9(3)).

(2) Where—

(a) there are two purchasers in relation to a chargeable
transaction, and

(b) one of them (“P”) is also the vendor in relation to the
20transaction,

P is to be treated for the purposes of sub-paragraph (1) as not being
a purchaser.

(3) Where—

(a) there are two vendors in relation to a chargeable
25transaction, and

(b) one of them (“V”) is also the purchaser in relation to the
transaction,

V is to be treated for the purposes of sub-paragraph (1) as not
being a vendor.”

30Property adjustment on divorce, dissolution of civil partnership etc

5 After paragraph 9A (as inserted by paragraph 4 of this Schedule) insert—

“Property adjustment on divorce, dissolution of civil partnership etc

9B (1) This paragraph applies where—

(a) a person (“A”) has a major interest in a dwelling,

(b) 35a property adjustment order has been made in respect of
the interest for the benefit of another person (“B”), and

(c) the dwelling—

(i) is B’s only or main residence, and

(ii) is not A’s only or main residence.

(2) 40A is to be treated for the purposes of this Schedule as not having
the interest in the dwelling.

(3) “Property adjustment order” means—