Finance (No. 2) Bill (151)

(b) the original recipient is not the settlor,

(c) at the time the original benefit is provided, the original
recipient is not a close member of the settlor’s family (see
section 643H),

(d) 5the original recipient is not taxed on the original benefit (see
subsection (7)),

(e) at the time the original benefit is provided—

(i) there are arrangements, or there is an intention, as
regards the (direct or indirect) passing-on of the
10whole, or part, of the original benefit to another
person, and

(ii) it is reasonable to expect that, in the event of the
whole or part of the original benefit being passed on
to another person as envisaged by the arrangements
15or intention, that other person will be UK resident
when they receive at least part of what is passed on to
them,

(f) the original recipient makes, directly or indirectly, a gift (“the
onward payment”) to a person (“the subsequent recipient”)—

(i) 20at the time the original benefit is provided to the
original recipient, or at any later time in the 3 years
beginning with the day containing that time, or

(ii) at any time before the original benefit is provided to
the original recipient and, it is reasonable to assume,
25in anticipation of the original benefit being provided,

(g) the gift is of or includes—

(i) the whole or part of the original benefit,

(ii) anything that (wholly or in part, and directly or
indirectly) derives from, or represents, the whole or
30part of the original benefit, or

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

(h) 35the subsequent recipient—

(i) is the settlor, or

(ii) is a close member of the settlor’s family at the time the
onward payment is made or, where that time is given
by subsection (4), at either or both of the time so given
40and the actual time the onward payment is made.

(2) Where—

(a) there is a series of two or more gifts,

(b) the first gift in the series is made, directly or indirectly, by the
original recipient—

(i) 45at the time the original benefit is provided, or at any
later time in the 3 years beginning with the day
containing that time, or

(ii) at any time before the original benefit is provided
and, it is reasonable to assume, in anticipation of the
50original benefit being provided,

(c) the recipient of a gift in the series is the person who makes,
directly or indirectly, the next gift in the series,

(d) the recipient of the last gift in the series is the settlor or, at the
time that last gift is made, is a close member of the settlor’s
5family,

(e) as regards any earlier gift in the series, its recipient—

(i) is not the settlor, and

(ii) is not, at the time that earlier gift is made, a close
member of the settlor’s family, and

(f) 10the condition in subsection (1)(g) is met in relation to each gift
in the series,

the last gift in the series is to be treated for the purposes of subsection
(1)(f) as if its maker were the original recipient (and not its actual
maker).

(3) 15So much of the onward payment as is within any of sub-paragraphs
(i) to (iii) of subsection (1)(g) is treated for the purposes of Step 1 in
section 643B(1) as a benefit provided by the trustees to the
subsequent recipient at the time the onward payment is made.

(4) Where the onward payment is made as mentioned in subsection
20(1)(f)(ii), the onward payment is to be treated, for the purposes of
subsections (1)(h) and (3), as made immediately after, and in the tax
year in which, the original benefit is provided to the original
recipient.

(5) Where subsection (1)(f) to (h) are met in any case, it is to be presumed
25(unless the contrary is shown) that subsection (1)(e) is also met in that
case.

(6) Where the benefit mentioned in section 643I(1)(b) is one that
subsection (3) of this section treats as provided, section 643I(1) has
effect with the omission of its paragraph (c).

(7) 30For the purposes of subsection (1)(d), the original recipient is taxed
on the original benefit if the original recipient is liable to income tax,
or capital gains tax, by reference to the amount or value of the
original benefit; and where the original recipient is so liable by
reference to the amount or value of part only of the original benefit,
35this section applies as if the two parts of the original benefit were
separate benefits.

(8) In this section—

• “arrangements” includes any agreement, understanding,
  scheme, transaction or series of transactions (whether or not
  40legally enforceable),

• “gift” includes any benefit, and

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

and see also section 643B(4) to (7) (interpretation of references to
provision of benefits by trustees).

643N 45Person liable under section 643J or 643L and remittance basis applies

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

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

(i) by section 643J(3) and (4) where section 643J(3)
applies because of section 643J(2), or

(ii) by section 643L, and

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis)
5applies 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 of ITA 2007 (remittance
basis) treat the onward payment, or (as the case may be) the part of
it whose amount or value is equal to the amount of the income, as
10deriving from the income.

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

ITA 2007

12 Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as
15follows.

13 (1) Section 731 (charge to tax on income treated as arising under section 732) is
amended as follows.

(2) After subsection (1B) insert—

“(1C) Subsection (1A) does not restrict the charge to tax under this section
20on income treated as arising to the individual by section 733C or
733E (onward gifts: recipient or settlor treated as individual to whom
income is treated as arising).””

(3) In subsection (2A) (which signposts section 735), for “section 735” substitute
“sections 735, 735B and 735C”.

14 25In section 732(1)(e) (where benefit received, income treated as arising only if
no tax on benefit apart from section 731)—

(a) after “is not liable to income tax” insert “, under any provision that is
none of section 731 of this Act and sections 643A, 643J and 643L of
ITTOIA 2005,”, and

(b) 30omit “(apart from section 731)”.

15 In section 733A(7) (meaning of “close member” of settlor’s family), for the
words after “family of the settlor” substitute “at any time if the settlor is
living at that time and—

“the person is the settlor’s spouse or civil partner at that time,
35or

(b) the person—

(i) is a child of the settlor, or of a person who at that time
is the settlor’s spouse or civil partner, and

(ii) at that time has not reached the age of 18.””

16 40After section 733A insert—

“733B Recipients of onward gifts

(1) Sections 733C to 733E apply if—

(a) an amount of income is treated as arising under section 732 to
an individual (“the original beneficiary”) in a tax year (“the
arising year”) but neither by section 733C nor by section 733E,

(b) under section 735A (if it applied also for this purpose) that
5amount would be matched—

(i) with an amount of relevant income that is protected
income for the purposes of section 733A(1)(b)(i) (see
sections 721(3BA) and 728(1B)), and

(ii) with the whole or part of a benefit received by the
10original beneficiary,

(c) at the time that benefit is received by the original beneficiary
(“the distribution time”)—

(i) there are arrangements, or there is an intention, as
regards the (direct or indirect) passing-on of the
15whole or part of that benefit to another person, and

(ii) it is reasonable to expect that, in the event of the
whole or part of that benefit being passed on to
another person as envisaged by the arrangements or
intention, that other person will be UK resident when
20they receive at least part of what is passed on to them,

(d) the original beneficiary makes, directly or indirectly, a gift
(“the onward payment”) to a person (“the subsequent
recipient”)—

(i) at the distribution time, or at any later time in the 3
25years 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
benefit mentioned in paragraph (b)(ii),

(e) the gift is of or includes—

(i) 30the whole or part of the benefit mentioned in
paragraph (b)(ii),

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

(iii) 35any 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
with, the making of the gift of the property to the
subsequent recipient,

(f) 40except 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) the original beneficiary is non-UK resident for the
arising year, or

(ii) 45section 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)
is relevantly remitted before the end of the charging
year, and

(g) 50where 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

applies 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) 5the amount mentioned in subsection (1)(a) is not treated as
arising 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
10amount, section 809B or 809D or 809E applies to the original
beneficiary 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
15arising year, and

(d) part 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) 20The original beneficiary is not liable to tax for any year after the
charging year on so much of the amount mentioned in subsection
(1)(a) as is—

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

(b) 25treated as arising to the settlor by section 733E;

and the settlor is not is liable under section 733A(2) or (3) to tax for
any 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) 30For the purposes of subsection (1)(d)(i)—

(a) if the amount mentioned in subsection (1)(a) is not one that is
treated 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) 35if the amount mentioned in subsection (1)(a) is one that is
treated as arising by section 733D in connection with the
operation 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) 40Where the onward payment is made as mentioned in subsection
(1)(d)(ii), the onward payment is to be treated—

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

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

45as made immediately after, and in the tax year containing, the
distribution time.

(6) Where 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,
  scheme, transaction or series of transactions (whether or not
  legally enforceable),

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

• “gift” includes any benefit,

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

• 10“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,

• “relevantly remitted” means remitted to the United Kingdom in
  a tax year for which the original beneficiary is UK resident
  15but, 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
  Kingdom in a tax year for which that individual is UK
  resident, and

• 20“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.

(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
25a benefit provided were references to a gift made.

(9) Sections 809L to 809Z6 (remittance basis: rules about when income is
remitted, 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
30733E, and

(b) apply for those purposes in relation to references to
remittance 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) 35Subsection (3) 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) 40none of sections 809B, 809D and 809E applies to the
subsequent recipient for the charging 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) 45the 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) 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) as if the subsequent recipient were an individual to whom
5income 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
onward payment as is within any of sub-paragraphs
10(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
in the charging year, equal to the amount or value of
15that 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
recipient is liable to income tax otherwise than under this
20section, and

(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) 25Subsection (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
30subsequent 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) 35the 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
40United 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) 45as 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
recipient as a result of the operation of section 733E,
or

(ii) were, where this subsection applies because of
5subsection (2) and part only of that much of the
onward payment is remitted to the United 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) (before adjustment under this
10subsection) is to be adjusted as follows: if that amount exceeds the
amount mentioned in section 733B(1)(a) in the case of the original
beneficiary, 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
15733B and this section on a previous occasion, section 733B(1) has
effect—

(a) with 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
20the onward payment on that previous occasion,

(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
25mentioned 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) 30this 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
35recipient 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) 40there 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
45effect 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) the 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) 5there is no time in the charging year when the settlor is
domiciled 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
10effect because of Condition A in that section being met.

(3) Section 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) 15were 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), or

(ii) were, where this subsection applies because of
subsection (1) in a case where part only of that much
20of the onward payment is remitted to the United
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
25subsection) 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
30the 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
35require 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) 40In 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
45read 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) for 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
5year by reference (direct or indirect) to the whole or
part of any benefits so provided.”, and”

(c) in subsection (4)—

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

(ii) 10for “Steps 2 and 5” substitute “Step 2”.

18 After 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
15received in a tax year, and

(b) income is treated by section 643A, 643J or 643L of ITTOIA
2005 as arising to a person in that or a subsequent tax year by
reference (direct or indirect) to the whole or part of any
benefits so provided.

(2) 20For any tax year after one in which such income is so treated, the
amount of income treated as arising to the individual under section
732(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) 25The amount is calculated under section 733(1) as if the total untaxed
benefits were reduced by the amount of that income.

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

19 After section 735B insert—

“735C 30 Person liable under section 733C or 733E and remittance basis applies

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

(a) the 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)
35where section 733C(3) applies because of section
733C(2), or

(ii) as 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) 40The income is treated as relevant foreign income of the individual.

(3) For the purposes of Chapter A1 of Part 14 (remittance basis) treat the
onward 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.