Finance (No. 2) Bill (151)

(a) as if a capital payment was received from the trustees by the
subsequent recipient—

(i) as a beneficiary of the settlement (whether or not the
subsequent recipient is otherwise a beneficiary of the
5settlement), and

(ii) at the time the subsequent recipient received the
onward payment,

(b) as if that capital payment consisted of—

(i) R, if G is greater than R, or

(ii) 10so much of R as is equal to G, if G is not greater than
R, and

(c) as if so much of the original payment as is equal to that capital
payment was not received by the otherwise-liable person.

(3) If G is greater than R, and if U is greater than nil—

(a) 15chargeable gains are treated as accruing to the subsequent
recipient in the gift year (but see section 87L(3) and (4)),

(b) the amount of those gains is—

(i) U, if
(G − R) is greater than U, or

(ii) 20so much of U as is equal to
(G − R), if
(G − R) is not
greater than U, and

(c) the chargeable gains treated by section 87 as accruing to the
25otherwise-liable person by reason of the original payment are
treated as from the end of the gift year as reduced by that
amount, with that reduction being made from so much of
those gains as has not by then been remitted to the United
Kingdom in a tax year in which the otherwise-liable person is
30resident in the United Kingdom.

(4) If this section applies by reference to the original payment also in
relation to a gift received from the original beneficiary in a tax year
earlier than the gift year, this section applies in relation to the
onward payment as if—

(a) 35the amount given by section 87J for R were reduced by the
amount of any capital payment given by subsection (2) in
relation to that earlier year, and

(b) the amount given by section 87J for U were reduced by the
amount of any gains given by subsection (3) in relation to that
40earlier year.

87L Cases where settlor liable following onward gift

(1) Subsection (2) applies where—

(a) ignoring this section and section 87M, a person is treated by
section 87K(2) as receiving a capital payment from the
45trustees of a settlement at a time (“the time of receipt”) in a tax
year,

(b) the settlor is resident in the United Kingdom at any time in
that year, and

(c) the person mentioned in paragraph (a) is a close member of
50the settlor’s family (see section 87H) at the time of receipt.

(2) Sections 87 and 87A have effect for that year, and later tax years, as if
the capital payment—

(a) was received from the trustees by the settlor—

(i) as a beneficiary of the settlement (whether or not the
settlor is otherwise a beneficiary of the settlement),
and

(ii) 5at the time of receipt, and

(b) was not received by the person mentioned in subsection
(1)(a).

(3) Subsection (4) applies where—

(a) in the case of a settlement, chargeable gains are (ignoring this
10section and section 87M) treated by section 87K(3) as
accruing to a person in a tax year (“the subsequent
recipient”),

(b) the settlor is resident in the United Kingdom at any time in
that year, and

(c) 15the subsequent recipient is a close member of the settlor’s
family when the subsequent recipient receives the onward
payment (see section 87I(1)(c)) by reference to which the
chargeable gains are treated as accruing.

(4) Section 87K(3)(a) has effect as if its reference to the subsequent
20recipient were a reference to the settlor, and references (however
expressed) to chargeable gains treated as accruing by this section are
to chargeable gains treated by section 87K(3)(a) as accruing to the
settlor as a result of the operation of this subsection.

(5) Where, in the case of a settlement, any tax is chargeable on the settlor
25as a result of this section and is paid, the settlor is entitled to recover
the full amount of the tax from the person mentioned in subsection
(1)(a) or (3)(a), as the case may be.

(6) For the purpose of recovering that amount, the settlor is entitled to
require an officer of Revenue and Customs to give the settlor a
30certificate specifying—

(a) the amount of tax paid, and

(b) the amount of the gains on which the tax is paid,

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

87M Cases where recipient of onward gift is user of remittance basis

(1) 35Subsection (2) applies where—

(a) ignoring this section, a person is treated by section 87K(2) as
receiving a capital payment from the trustees of a settlement
at a time (“the time of receipt”) in a tax year,

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis)
40applies to the person for that tax year, and

(c) the payment is not treated by section 87L(2) as received by
the settlor.

(2) Section 87I(1)(a) has effect as if the capital payment were received
from the trustees by the person at the time of receipt, and section
4587K(2)(a) and (b) do not have effect for the purposes of sections 87
and 87A in the case of the payment.

(3) The rules in subsection (4) apply where—

(a) in the case of a settlement, chargeable gains are (ignoring this
section) treated by section 87K(3), but not as a result of the
operation of section 87L(4), as accruing to a person in a tax
year by reference to a gift within section 87I(1)(d) made to the
5person,

(b) section 809B, 809D or 809E of ITA 2007 applies to the person
for that tax year, and

(c) none, or part only, of the gains is remitted to the United
Kingdom in that tax year.

(4) 10The rules are—

(a) section 87I(1)(a) has effect—

(i) as if a capital payment were received from the
trustees by the person at the time the gift is made, and

(ii) as if the capital payment were equal in amount to so
15much of the gains as is not remitted in the tax year
mentioned in subsection (3)(a) of this section,

(b) for the purposes of section 87J—

(i) the whole of the capital payment is a “matched
amount”, and

(ii) 20the whole of the matched amount is its “untaxed part”
(and the matched amount has no “taxed part”), and

(c) the amount of the gains treated by section 87K(3)(a) and (b)
as accruing to the person by reference to the gift is reduced by
the amount of the capital payment.

(5) 25Where the capital payment mentioned in section 87I(1)(a) is one
treated as received by subsection (2) or (4) of this section in
connection with the operation of sections 87I to 87K on a previous
occasion, section 87I(1) has effect—

(a) with the omission of its paragraph (b),

(b) 30as if the reference in its paragraph (c) to the original payment
were, instead, to what was the onward payment on that
previous occasion, and

(c) as if the references in its paragraph (d) to the original
payment were, instead, to so much of that onward payment
35as was on that previous occasion within any of sub-
paragraphs (i) to (iii) of that paragraph.

(6) Section 87I(4) and (7) (interpretation of references to gifts and their
making) apply also for the purposes of subsections (3) and (4) of this
section.

87N 40Sections 87 and 87A: disregard of payments to migrating beneficiary

(1) For the purposes of sections 87 and 87A as they apply in relation to a
settlement for a particular tax year, no account is to be taken of a
capital payment (or part of a capital payment) within subsection (2),
but this is subject to section 87P.

(2) 45A capital payment is within this subsection—

(a) if it is received by a beneficiary of the settlement before the
particular tax year,

(b) if the relevant person is resident in the United Kingdom in
the tax year in which it is received,

(c) if the relevant person is not resident in the United Kingdom
in the particular tax year, and

(d) so far as it has not been matched (under section 87A as it
applies for tax years before the particular tax year) with—

(i) 5the section 2(2) amount for any tax year before the
particular tax year, but not earlier than the tax year
2018-19, in which the relevant person is resident in the
United Kingdom, or

(ii) the section 2(2) amount for any tax year earlier than
10the tax year 2018-19.

(3) For the purposes of subsection (2), the beneficiary is “the relevant
person” unless section 87G(2) applies in relation to the capital
payment in which event the settlor is “the relevant person”.

87P Sections 87 and 87A: temporary migration after payment disregarded

(1) 15If—

(a) as a result of section 87N, no account is taken of a capital
payment (or a part of a capital payment) for the purposes of
sections 87 and 87A as they apply in relation to a settlement
for a particular tax year,

(b) 20the recipient beneficiary (where section 87G(2) does not
apply in relation to the capital payment), or the settlor (where
section 87G(2) does apply in relation to the capital payment),
is an individual who is temporarily non-resident,

(c) the whole or part of the particular tax year constitutes, or
25forms part of, that individual’s temporary period of non-
residence,

(d) either—

(i) that individual’s temporary period of non-residence
begins with the start of a tax year and the payment (or
30part) is received before that tax year, or

(ii) that individual’s temporary period of non-residence
begins otherwise than at the start of a tax year and the
payment (or part) is received before, or at any time in,
the tax year in which that individual’s temporary
35period of non-residence begins, and

(e) the payment (or part) has not been matched (under section
87A as it applies for tax years before the particular tax year)
with—

(i) the section 2(2) amount for any tax year before the
40particular tax year, but not earlier than the tax year
2018-19, in which that individual is resident in the
United Kingdom, or

(ii) the section 2(2) amount for any tax year earlier than
the tax year 2018-19,

45the payment (or part) is treated for the purposes of sections 87 and
87A as received (by that individual) in that individual’s period of
return, and account is to be taken of it accordingly for those
purposes.

(2) Part 4 of Schedule 45 to FA 2013 explains—

(a) when an individual is to be regarded as “temporarily non-
resident”, and

(b) what “the temporary period of residence” and “the period of
return” mean.””

(2) 5In sections 2(4) and (5), 16ZC(4) and 62(2A)(a) of TCGA 1992, after “87”
insert “, 87K, 87L”.

(3) In section 86A(1) of TCGA 1992 (attribution of gains to settlor in temporary
non-residence cases)—

(a) in paragraph (b)—

(i) 10for “beneficiaries of the settlement” substitute “, in the case of
the settlement, individuals”, and

(ii) after “87” insert “, 87K, 87L”, and

(b) in paragraph (c) omit “by the beneficiaries”.

(4) In section 87 of TCGA 1992 (non-UK resident settlements: attribution of
15gains to beneficiaries)—

(a) after subsection (2) insert—

“(2A) If the relevant tax year is a split year as respects the
beneficiary, the gains are treated as accruing in the UK part
of that year.”, and”

(b) 20omit subsection (7) (apportionment of gains where relevant year is a
split year).

(5) In section 87B of TCGA 1992 (section 87: remittance basis)—

(a) in subsection (1)(a), after “87” insert “, 87K or 87L”,

(b) in subsection (1)(b) (which refers to sections 809B, 809D and 809E of
25ITA 2007), after “809E” insert “of ITA 2007”, and

(c) in subsection (4), after “capital payment” insert “, or onward
payment (see section 87I(1)(c)),”.

(6) In section 89(3) of TCGA 1992 (application of sections 87 to 87C in relation to
migrant settlements), for “87C” substitute “87P”.

(7) 30In section 91 of TCGA 1992 (increase in tax payable under section 87 or
89(2))—

(a) in subsection (1)(a)—

(i) after “87” insert “, 87K, 87L”, and

(ii) for “a beneficiary” substitute “an individual directly, or
35indirectly,”, and

(b) in subsections (1)(b), (2) and (3), for “beneficiary” substitute
“individual”.

(8) In sections 279A(7)(b) and 279C(6)(c) of TCGA 1992, after “87” insert “, 87K,
87L”.

(9) 40In paragraph 1A of Schedule 4C to TCGA 1992—

(a) in Step 2 in sub-paragraph (1)—

(i) after “applies if,” insert “directly or indirectly”

(ii) after “87” insert “, 87K, 87L”, and

(iii) for “a beneficiary” substitute “an individual”, and

(b) 45in sub-paragraph (3)—

(i) for “a beneficiary” substitute “an individual”, and

(ii) for “the beneficiary” substitute “the individual”.

(10) In paragraph 8 of Schedule 4C to TCGA 1992, after sub-paragraph (5)
insert—

“(6) Sections 87G(2), 87K(2) and 87L(2) (capital payment treated for
5purposes of sections 87 and 87A as received by someone other
than actual recipient) apply also for the purposes of this
paragraph, but this is subject to paragraph 9.””

(11) In consequence of sub-paragraph (4)(b), in Schedule 45 to FA 2013 omit
paragraph 101.

(12) 10The new sections 87D and 87E have effect—

(a) except as provided by the new section 87D(3), in relation to
payments received in the tax year 2018-19 or a later tax year, and

(b) in the tax year 2018-19 and later tax years, also in relation to
payments received before the tax year 2018-19 that have not been
15matched under section 87A of TCGA 1992 as it applies for tax years
before the tax year 2018-19.

(13) The new sections 87F and 87G, and the amendments made by sub-
paragraphs (4) and (11), have effect in relation to payments received in the
tax year 2018-19 or a later tax year.

(14) 20The new sections 87I to 87M have effect in relation to onward payments
made on or after 6 April 2018, and do so even in cases where the original
payment is received before that date.

(15) The new sections 87N and 87P have effect where the particular tax year is the
tax year 2018-19 or a later tax year.

(16) 25The amendment made in section 89 has effect for the tax year 2018-19 and
later tax years.

2 (1) Sub-paragraph (2) applies in a case where—

(a) section 10A of TCGA 1992 (temporary non-residents) as substituted
by paragraph 119 of Schedule 45 to FA 2013 applies in relation to an
30individual,

(b) the period of temporary non-residence began before 8 July 2015, and

(c) a capital payment (or part of a capital payment) is treated by section
87E or 87P of TCGA 1992 as received by the individual in the period
of return.

(2) 35For the purposes of capital gains tax in respect of any chargeable gain treated
by section 87 of TCGA 1992 as accruing to the individual as a result of
matching of the payment (or part), section 809B(1A) of ITA 2007 does not
have effect in relation to the tax year which consists of or includes the period
of return.

(3) 40Where by virtue of sub-paragraph (2) the individual makes a claim under
section 809B of ITA 2007 for any of the tax years 2018-19 to 2020-21 inclusive,
sections 809C, 809G and 809H of ITA 2007 do not apply to the individual for
that tax year.

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

Part 2 Income tax

ITTOIA 2005

3 (1) Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income
5of settlor) is amended as follows.

(2) In the Chapter heading, after “settlor” insert “or family”.

4 In section 619(1) (list of provisions in the Chapter charging tax)—

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

(b) after paragraph (d) insert—

“(e) 10benefits whose amount or value is treated as income
of the settlor or a close family member as a result of
section 643A (benefits provided out of protected
foreign-source income), and

(f) amounts treated as income of the settlor or a close
15family member by section 643J or 643L (gifts provided
out of benefits).””

5 In section 621 (income charged under the Chapter), for “income and capital
sums” substitute “income, capital sums and benefits”.

6 In section 622 (person liable), at the end insert “, but this is subject to sections
20643A and 643I to 643M.”

7 In section 623 (deductions and reliefs allowed when calculating liability
under the Chapter)—

(a) for “a settlor” substitute “an individual”, and

(b) for “the settlor”, in both places it occurs, substitute “the individual”.

8 25In section 635 (amount of available income for section 633 purposes)—

(a) in subsection (3)(d)(i) (tax on certain income to be deducted when
calculating available amount), before “income” insert “unprotected”,
and

(b) in subsection (5) (meaning of “unprotected income”), for “subsection
30(2)” substitute “this section and sections 636 and 637”.

9 In section 636 (amount of unprotected income that is undistributed for
section 635 purposes)—

(a) in subsection (2) (deducting payments that are or would be taxable
as recipients’ income)—

(i) 35in the words before paragraph (a) omit “such”,

(ii) in those words, for “as” substitute “that are payments of
unprotected income, or sums treated as representing
unprotected income, and that”, and

(iii) in paragraph (b), for “so treated” substitute “treated as
40mentioned in paragraph (a)”,

(b) in subsection (4) (deducting expenses properly chargeable to
income), before “income” insert “unprotected”, and

(c) in subsection (6) (deducting amounts in respect of exempt income),
in the definition of “A”, before “income” insert “unprotected”.

10 In section 637 (qualifications to section 636)—

(a) in subsections (2), (3) and (4) (extent to which interest treated as
deductible trust expenses), before “interest” insert “relevant”,

(b) in subsection (5) (the relevant fraction), in the definition of “A”,
5before “income” insert “unprotected”, and

(c) after subsection (7) insert—

“(7A) In this section “relevant interest” means interest which, in the
absence of any express provision of the settlement, would be
properly chargeable to unprotected income.””

11 10After section 643 insert—

““Benefits matched with protected foreign-source income

643A Deemed income because of benefits for settlor or close family member

(1) If an individual has an untaxed benefits total for a settlement for a tax
year (see section 643B), an amount equal to so much of that total as
does not exceed the settlement’s available protected income up to the
15end of the year (see section 643C) is—

(a) where the individual is UK resident for the year, treated for
income tax purposes as income of the individual for the year,
subject to subsections (2) to (5), and

(b) where the individual is non-UK resident for the year, treated
20for the purposes of subsection (2) and sections 643I to 643L
(but no other purpose) as income of the individual for the
year, subject to subsection (5).

(2) Subsections (3) and (4) apply if—

(a) an amount (“the deemed income”) is treated by subsection
25(1), before the application of subsections (3) and (4), as
income of an individual for a tax year,

(b) the individual is not the settlor,

(c) either—

(i) the individual is non-UK resident for the year, or

(ii) 30the individual is UK resident for the year and one of
sections 809B, 809D and 809E of ITA 2007 (remittance
basis) applies to the individual for the year,

(d) the settlor is UK resident for the year,

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

(f) there is no time in the year when the settlor is regarded for
the purposes of section 809B(1)(b) of ITA 2007 as domiciled in
the United Kingdom as a result of section 835BA of ITA 2007
having effect because of Condition A in that section being
40met.

(3) If the case is one—

(a) where the condition in subsection (2)(c)(i) is met, or

(b) where the condition in subsection (2)(c)(ii) is met and none of
the deemed income is remitted to the United Kingdom in the
45year,

the deemed income is to be treated for income tax purposes as
income of the settlor for the year and, in a case within paragraph (b),
not as income of the individual for the year.

(4) If the case is one—

(a) 5where the condition in subsection (2)(c)(ii) is met, and

(b) part only of the deemed income is remitted to the United
Kingdom in the year,

the remainder of the deemed income is to be treated for income tax
purposes not as income of the individual for the year but as income
10of the settlor for the year.

(5) If there is a choice about the individuals in whose case income is to
be treated as arising by subsection (1) (before the application of
subsections (3) and (4))—

(a) income is to be treated as arising to such one or more of them
15as appears to an officer of Revenue and Customs to be just
and reasonable, and

(b) if more than one, in such respective proportions as appears to
the officer to be just and reasonable.

(6) Sections 809L to 809Z6 of ITA 2007 (remittance basis: rules about
20when income is remitted) apply for the purposes of this section.

(7) If—

(a) an enactment other than this section contains a reference
(however expressed) to—

(i) income treated as arising by this section, or

(ii) 25an amount treated as income by this section, and

(b) the reference mentions this section without mentioning any
particular provision of this section,

the reference is (in accordance with subsection (1)(b)) to be read as
not including amounts treated as income by subsection (1)(b) except
30so far as they are treated as income of the settlor of a settlement by
subsection (3) or (4).

643B Meaning of “untaxed benefits total” in section 643A

(1) For the purposes of section 643A, whether an individual has an
untaxed benefits total for a settlement for a tax year (“the current
35year”), and (if so) its amount, are determined as follows—

Step 1

If the individual is the settlor, identify each benefit provided by the
trustees to the individual at a time—

• when the individual is not relevantly domiciled, and

• 40in a tax year that is the current year or an earlier tax year.

If the individual is not the settlor, identify each benefit provided by
the trustees to the individual at a time—

• when the individual is a close member of the settlor’s family
  (see section 643H), and

• 45in a tax year that is the current year or an earlier tax year.

Step 2

Identify the amount or value of each benefit identified in the
individual’s case at Step 1, and calculate the total of those amounts
and values.

5Step 3

Take the total calculated at Step 2 and deduct from it the following—

• any part of it on which the individual is liable to income tax
  otherwise than under section 643A,

• any income treated by section 643A, 643J or 643L as arising,
  10to a person for a tax year earlier than the current year, by
  reference to any of the benefits identified in the individual’s
  case at Step 1,

• where the whole or part of a benefit identified in the
  individual’s case at Step 1 is taken into account in charging
  15income tax under Chapter 2 of Part 13 of ITA 2007, the
  amount or value of so much of the benefit as is taken into
  account in doing that, and

• any amount required to be deducted by section 643D(2)
  (gains treated as accruing in a year before the current year).

20Step 4

If the result of the calculation at Step 3 is an amount greater than nil,
that amount is the individual’s untaxed benefits total for the
settlement for the current year.

(2) For the purposes of Step 1 in subsection (1), an individual is
25“relevantly domiciled” at any time if at that time—

(a) the individual is domiciled in the United Kingdom, or

(b) the individual is regarded for the purposes of section
809(1)(b) of ITA 2007 as domiciled in the United Kingdom as
a result of section 835BA of ITA 2007 having effect because of
30Condition A in that section being met.

(3) Sections 742C to 742E of ITA 2007 (value of certain benefits) apply for
the purpose of calculating the value of a benefit for the purposes of
this section as they apply for the purpose of calculating an income
tax charge under Chapter 2 of Part 13 of ITA 2007.

(4) 35In this section and sections 643C to 643M, a reference to a benefit
provided by trustees of a settlement is to—

(a) a benefit treated by subsection (6) as provided by the trustees,
or

(b) any other benefit if it is provided by the trustees directly, or
40indirectly, out of—

(i) property comprised in the settlement, or

(ii) income arising under the settlement.

(5) In this section and sections 643C to 643M, a reference to a benefit
provided by trustees of a settlement to an individual is to—

(a) 45a benefit treated by subsection (6) as provided by the trustees
to the individual, or

(b) any other benefit if it is provided by the trustees to the
individual directly, or indirectly, out of—

(i) property comprised in the settlement, or

(ii) 50income arising under the settlement.