Finance (No. 3) Bill (HC Bill 282)
SCHEDULE 1 continued PART 1 continued
Contents page 1-9 10-19 20-29 30-37 40-49 50-59 60-69 70-79 80-89 90-99 100-109 110-119 120-129 130-139 140-156 157-159 160-169 170-179 180-189 190-199 200-209 Last page
Finance (No. 3) BillPage 100
Attribution of gain to residential property
2
(1)
The proportion of a chargeable gain attributable to residential
property is equal to—
(a) the relevant fraction of the gain, and
(b)
5if there has been mixed use of the land to which the
disposal relates on one or more days in the applicable
period, the relevant fraction of the gain as adjusted, on a
just and reasonable basis, to take account of the mixed use
on the day or days.
(2) 10The relevant fraction is A/B where—
-
A is the number of days in the applicable period on which the
land to which the disposal relates consists of or includes a
dwelling, and -
B is the total number of days in the applicable period.
(3)
15There is mixed use of land on any day on which the land consists
of—
(a) one or more dwellings, and
(b) other land.
(4)
If the disposal is of an interest in land subsisting under a contract
20for the acquisition of land consisting of or including a building
that is to be constructed or adapted for use as a dwelling, that land
is taken to consist of or include a dwelling throughout the
applicable period.
(5) In this paragraph “the applicable period” means the period—
(a)
25beginning with the day on which the person making the
disposal acquired the interest in land being disposed of or,
if later, the day from which the interest in land became
chargeable, and
(b)
ending with the day before the day on which the disposal
30occurs.
(6)
For the purposes of this paragraph an interest in land became
“chargeable”—
(a)
in any case where the disposal is of an interest in land in
the United Kingdom—
(i)
35by a person in a tax year in which the person is not
UK resident, or
(ii)
by a person in the overseas part of a tax year which
is, as respects the person, a split year,
from 6 April 2015, and
(b) 40in any other case, from 31 March 1982.
(7)
If the interest in land disposed of by the person results from
interests in land acquired by the person at different times, the
person is regarded for the purposes of this paragraph as having
acquired the interest disposed of at the time of the first acquisition.
Finance (No. 3) BillPage 101
Disposing of residential property
3
(1)
For the purposes of this Schedule a person “disposes of residential
property” if the person disposes of an interest in land in a case
where—
(a)
5the land consisted of or included a dwelling at any time
falling on or after the date on which the applicable period
begins,
(b)
the interest in land subsisted for the benefit of land that
consisted of or included a dwelling at any time falling on
10or after that date, or
(c)
the interest in land subsists under a contract for the
acquisition of land consisting of or including a building
that is to be constructed or adapted for use as a dwelling.
(2)
No account is to be taken for the purposes of this paragraph of any
15time falling on (or after) the day on which the disposal is made.
Interest in land
4 (1) For the purposes of this Schedule an “interest in land” means—
(a) an estate, interest, right or power in or over land, or
(b)
the benefit of an obligation, restriction or condition
20affecting the value of an estate, interest, right or power in
or over land,
other than an excluded interest.
(2) The following interests are “excluded interests”—
(a)
any interest or right held for securing the payment of
25money or the performance of any other obligation,
(b) a licence to use or occupy land,
(c)
in relation to land in England and Wales or Northern
Ireland, a tenancy at will or an advowson, franchise or
manor, and
(d)
30such other descriptions of interest or right in relation to
land as may be specified in regulations made by the
Treasury.
(3) An interest or right is not within sub-paragraph (2)(a) if it is—
(a) a rentcharge, or
(b)
35in relation to land in Scotland, a feu duty or a payment
mentioned in section 56(1) of the Abolition of Feudal
Tenure etc (Scotland) Act 2000.
(4)
The grant of an option by a person binding the person to dispose
of an interest in land is (so far as it would not otherwise be the
40case) regarded as a disposal of an interest in land by the person for
the purposes of this Schedule.
(5)
This does not affect the operation of section 144 in relation to the
grant of the option (or otherwise).
(6)
In applying the domestic concepts of law mentioned in this
45paragraph to land outside the United Kingdom, this paragraph is
Finance (No. 3) BillPage 102
to be read so as to produce the result most closely corresponding
with that produced in relation to land in the United Kingdom.
(7) In this paragraph—
-
“franchise” means a grant from the Crown such as the right
5to hold a market or fair, or the right to take tolls, and -
“land” includes—
(a)buildings and structures, and
(b)land under the sea or otherwise covered by water.
Dwelling: basic meaning
5
(1)
10For the purposes of this Schedule a building is a dwelling at any
time when—
(a) it is used, or suitable for use, as a dwelling, or
(b)
it is in the process of being constructed or adapted for use
as a dwelling,
15and, in each case, it is not an institutional building.
(2)
Land that at any time is, or is intended to be, occupied or enjoyed
with a dwelling as a garden or grounds (including any building or
structure) is taken to be part of the dwelling at that time.
(3) A building is an institutional building if—
(a) 20it is used as residential accommodation for school pupils,
(b)
it is used as residential accommodation for members of the
armed forces,
(c)
it is used as a home or other institution providing
residential accommodation for children,
(d)
25it is used as a home or other institution providing
residential accommodation with personal care for persons
in need of personal care because of old age, disability, past
or present dependence on alcohol or drugs or past or
present mental disorder,
(e) 30it is used as a hospital or hospice,
(f) it is used as a prison or similar establishment,
(g) it is used as a hotel or inn or similar establishment,
(h)
it is otherwise used, or suitable for use, as an institution
that is the sole or main residence of its residents,
(i) 35it falls within—
(i)
paragraph 4 of Schedule 14 to the Housing Act 2004
(buildings in England or Wales occupied by
students and managed or controlled by
educational establishment etc), or
(ii)
40any provision having effect in Scotland or
Northern Ireland that is designated by regulations
made by the Treasury as provision corresponding
to paragraph 4 of that Schedule, or
(j)
it qualifies in accordance with the next sub-paragraph as
45student accommodation.
Finance (No. 3) BillPage 103
(4)
A building qualifies as student accommodation in accordance
with this sub-paragraph at any time if the time falls in a tax year in
which—
(a)
the accommodation provided by the building includes at
5least 15 bedrooms,
(b)
the accommodation is purpose-built, or is converted, for
occupation by students, and
(c)
the accommodation is occupied by students on at least 165
days.
(5)
10Accommodation is to be regarded as occupied by persons as
students if they occupy it wholly or mainly for undertaking a
course of education (otherwise than as school pupils).
Building temporarily unsuitable for use as a dwelling
6
(1)
A building is treated for the purposes of paragraph 5 as continuing
15to be suitable for use as a dwelling at any time when it has become
temporarily unsuitable for use as a dwelling.
(2) There is an exception to this rule if—
(a)
the temporary unsuitability resulted from accidental
damage to the building, and
(b)
20the damage resulted in the building becoming unsuitable
for use as a dwelling for a period of at least 90 consecutive
days (“the 90 day period”).
(3)
This exception does not apply if the damage occurred in the course
of work that—
(a)
25was being done for the purpose of altering the building,
and
(b)
itself involved, or could be expected to involve, making the
building unsuitable for use as a dwelling for at least 30
consecutive days.
(4)
30If the exception applies, work done in the 90 day period to restore
the building to suitability for use as a dwelling is not to count for
the purposes of paragraph 5 as constructing or adapting the
building for use as a dwelling.
(5) For the purposes of this paragraph—
(a)
35references to accidental damage include damage
otherwise caused by events beyond the control of the
person disposing of the interest in land,
(b)
references to alteration of a building include its partial
demolition, and
(c)
40the 90 day period does not include the day of the disposal
(or later days).
(6)
For the purposes of this paragraph a building’s unsuitability for
use as a dwelling is not regarded as temporary if paragraph 7
applies (disposal of a building that has undergone works).
Finance (No. 3) BillPage 104
Disposal of a building that has undergone works
7 (1) If—
(a)
a person disposes of an interest in land on which a building
has been suitable for use as a dwelling, and
(b)
5as a result of qualifying works, the building has, at or
before the time of completion of the disposal, ceased to
exist or become unsuitable for use as a dwelling,
the building is to be regarded for the purposes of paragraph 5 as
unsuitable for use as a dwelling throughout the works period.
(2)
10For the purposes of this paragraph works are “qualifying” works
if—
(a)
any planning permission or development consent required
for the works, or for any change of use with which they are
associated, has been granted (whether before or after
15completion), and
(b)
the works have been carried out in accordance with the
permission or consent.
(3) In this paragraph “the works period” means—
(a) the period when the works were in progress, and
(b)
20such period (if any) ending immediately before the start of
the works throughout which the building was, for reasons
connected with the works, not used as dwelling.
(4) If at any time when qualifying works are in progress—
(a)
the building was undergoing any other work, or put to any
25other use, in relation to which planning permission or
development consent was required but has not (at any
time) been granted, or
(b)
anything else was being done in contravention of a
condition or requirement attached to a planning
30permission or development consent relating to the
building,
the works period does not include that time.
(5)
If sub-paragraph (1) would have applied but for the fact that, at
the completion of the disposal, the works are not qualifying
35works, the works are regarded as not affecting the building’s
suitability for use as a dwelling at any time before the disposal.
Other definitions
8
(1)
For the purposes of this Schedule a building is regarded as ceasing
to exist from the time when either—
(a) 40it has been demolished completely to ground level, or
(b)
it has been demolished to ground level except for a single
facade (or a double facade if it is on a corner site) the
retention of which is a condition or requirement of
planning permission or development consent.
(2)
45For the purposes of this Schedule the completion of the disposal of
an interest in land is regarded as occurring—
(a) at the time of the disposal, or
Finance (No. 3) BillPage 105
(b)
if the disposal is under a contract which is completed by a
conveyance, transfer or other instrument, at the time when
the instrument takes effect.
(3) In this Schedule—
-
5“building” includes a part of a building,
-
“development consent” means—
(a)in the case of land in the United Kingdom,
development consent under the Planning Act 2008,
and(b)10in the case of land outside the United Kingdom,
consent corresponding to development consent
under that Act, and -
“planning permission”—
(a)in the case of land in England or Wales, has the
15meaning given by section 336(1) of the Town and
Country Planning Act 1990,(b)in the case of land in Scotland, has the meaning given
by section 227(1) of the Town and Country Planning
(Scotland) Act 1997,(c)20in the case of land in Northern Ireland, has the
meaning given by Article 2(2) of the Planning
(Northern Ireland) Order 1991, and(d)in the case of land outside the United Kingdom,
means permission corresponding to any planning
25permission in relation to land anywhere in the United
Kingdom.
Power to modify meaning of “use as a dwelling”
9
(1)
The Treasury may by regulations amend this Schedule for the
purpose of clarifying or changing the cases where a building is, or
30is not, to be regarded as being used, or suitable for use, as a
dwelling.
(2)
The provision that may be made by the regulations includes (for
example) provision omitting or adding cases where a building is,
or is not, to be regarded as being used, or suitable for use, as a
35dwelling.
Regulations
10
Regulations under any provision of this Schedule may make
incidental, consequential, supplementary or transitional provision
or savings.”
Finance (No. 3) BillPage 106
16 After Schedule 1B insert—
““Schedule 1C Annual exempt amount in cases involving settled property
Introductory
1
(1)
This Schedule provides for the application of section 1K (in some
5cases with modifications) in relation to the trustees of a settlement
for a tax year.
(2)
The application of this Schedule depends on (among other things)
whether or not—
(a) a settlement is for the benefit of a disabled person, and
(b) 10a settlement is a qualifying UK settlement.
(3)
For the definitions of those expressions, see paragraphs 3 and 7
respectively.
(4)
In this Schedule any reference to the application of section 1K in
relation to an individual for a tax year is to its application in
15relation to an individual who is resident and domiciled in the
United Kingdom for the year.
Settlements for the benefit of disabled persons
2
(1)
In the case of a settlement for the benefit of a disabled person for a
tax year, section 1K applies in relation to the trustees of the
20settlement for the year as it applies in relation to an individual for
the year.
(2) This paragraph needs to be read with—
(a)
paragraph 6 (cases where settlement is a qualifying UK
settlement comprised in a group), and
(b) 25paragraph 8 (sub-fund settlements).
3
(1)
A settlement is a “settlement for the benefit of a disabled person”
for a tax year if, for the whole or part of that year, settled property
is held on trusts which secure that, during the lifetime of a
disabled person, the property and income tests are met.
(2)
30The property test is met if any of the property which is applied for
the benefit of a beneficiary is applied for the disabled person’s
benefit.
(3) The income test is met if either—
(a)
the disabled person is entitled to all of the income (if any)
35arising from any of the property, or
(b)
if any income arising from any of the property is applied
for the benefit of a beneficiary, it is applied for the disabled
person’s benefit.
(4)
A settlement is not prevented from being a settlement for the
40benefit of a disabled person for a tax year just because—
(a)
the trustees have power to apply amounts (of any nature)
not exceeding the de minimis threshold for that year,
Finance (No. 3) BillPage 107
(b)
the trustees have the powers of advancement conferred by
section 32 of the Trustee Act 1925 or section 33 of the
Trustee Act (Northern Ireland) 1958,
(c)
the trustees have those powers but free from, or subject to
5a less restrictive limitation than, the limitation imposed
by—
(i)
proviso (a) of section 32(1) of the Trustee Act 1925,
or
(ii)
section 33(1)(a) of the Trustee Act (Northern
10Ireland) 1958, or
(d)
the trustees have powers to the same effect as the powers
mentioned in paragraph (b) or (c).
(5)
For the purposes of sub-paragraph (4)(a) “the de minimis
threshold” means—
(a) 15£3,000, or
(b)
3% of the maximum value of the settled property during
the tax year,
whichever is the lower.
(6)
In this paragraph “disabled person” has the meaning given by
20Schedule 1A to the Finance Act 2005.
(7)
If the income from settled property is held for the benefit of a
disabled person (“D”) on trusts of the kind described in section 33
of the Trustee Act 1925 (protective trusts), the reference in this
paragraph to D’s lifetime is to be read as a reference to the period
25during which the income is held on trust for D.
(8) This paragraph applies for the purposes of this Schedule.
4 (1) The Treasury may by order—
(a)
specify circumstances in which paragraph 3(4)(a) is, or is
not, to apply, and
(b)
30amend the definition of “the de minimis threshold” in
paragraph 3(5).
(2) The order may—
(a) make different provision for different purposes, and
(b) contain transitional and saving provision.
(3)
35A statutory instrument containing an order under this paragraph
which reduces the annual exempt amount in any case may not be
made unless a draft of the instrument has been laid before, and
approved by a resolution of, the House of Commons.
Other settlements
5
(1)
40This paragraph applies if settlement is not a settlement for the
benefit of a disabled person for a tax year.
(2)
Section 1K applies in relation to the trustees of the settlement for
the year as it applies in relation to an individual for the year but as
if the annual exempt amount for the year were one-half of the
45amount available for the individual for the year.
Finance (No. 3) BillPage 108
(3) This paragraph needs to be read be with—
(a)
paragraph 6 (cases where settlement is qualifying UK
settlement comprised in a group), and
(b) paragraph 8 (sub-fund settlements).
5Special rules for qualifying UK settlements comprised in groups
6
(1)
This paragraph reduces the annual exempt amount for trustees of
a settlement for a tax year if the settlement is one of two or more
qualifying UK settlements comprised in a group.
(2)
In the case of a settlement for the benefit of a disabled person for
10the year, the annual exempt amount for the year is to be reduced
so that it is equal to—
(a) one-tenth of an individual’s amount for that year, or
(b)
the amount resulting from dividing the individual’s
amount for that year by the number of settlements in the
15group,
whichever is the greater.
(3)
In the case of any other settlement, the annual exempt amount for
the year is to be reduced so that it is equal to—
(a) one-tenth of an individual’s amount for that year, or
(b)
20the amount resulting from dividing half of an individual’s
amount for that year by the number of settlements in the
group,
whichever is the greater.
(4)
In this paragraph “an individual’s amount”, in relation to a tax
25year, means the annual exempt amount applying to an individual
for the year under section 1K.
(5)
For the purposes of this paragraph all qualifying UK settlements
in relation to which the same person is the settlor constitute a
group.
(6) 30If—
(a)
two or more persons are settlors in relation to a settlement,
and
(b)
a settlement is consequently comprised in two or more
groups comprising different numbers of settlement,
35sub-paragraphs (2)(b) and (3)(b) have effect by reference to the
largest group.
7
(1)
In this Schedule “qualifying UK settlement”, in relation to a tax
year, means any settlement in relation to which both of the
following conditions are met—
(a)
40the trustees of the settlement are resident in the United
Kingdom during any part of the tax year, and
(b)
the property comprised in the settlement is not held for a
charitable or pensions purpose.
(2)
Property comprised in a settlement is held for a charitable purpose
45if (and only if)—
(a) it is held for charitable purposes only, and
Finance (No. 3) BillPage 109
(b) it cannot become applicable for other purposes.
(3)
Property comprised in a settlement is held for a pensions purpose
if (and only if) it is held for the purposes of—
(a) a registered pension scheme,
(b)
5a superannuation fund to which section 615(3) of the Taxes
Act applies, or
(c)
an occupational pension scheme (within the meaning of
section 150(5) of the Finance Act 2004) that is not a
registered pension scheme.
(4)
10For this purposes of any provision of this Schedule other than
paragraph 8 a settlement is not a qualifying UK settlement if—
(a)
in the case of one for the benefit of a disabled person, it was
made before 10 March 1981, or
(b) in any other case, it was made before 6 June 1978.
15Special rules for principal settlements and sub-funds
8 (1) This paragraph—
(a)
applies if the trustees of a settlement (“the principal
settlement”) have made an election under paragraph 1 of
Schedule 4ZA the effect of which is that one or more other
20settlements (“sub-fund settlements”) are treated as created,
and
(b)
provides for the annual exempt for the trustees of each of
the affected settlements to be determined by reference to
the assumed annual amount.
(2) 25For this purposes of this paragraph—
(a)
the principal settlement and each of the sub-fund
settlements is an “affected settlement”, and
(b)
the “assumed annual amount” means the amount which
would be the annual exempt for the trustees of the
30principal settlement on the assumption that no election
had been made under paragraph 1 of Schedule 4ZA.
(3)
The annual exempt amount for the trustees of each of the affected
settlements is the assumed annual amount unless there are two or
more qualifying UK settlements in the affected settlements.
(4)
35In that case, the annual exempt amount for the trustees of each of
the affected settlements is the assumed annual amount divided by
the number of qualifying UK settlements in the affected
settlements.”