Finance (No. 3) Bill (HL Bill 304)

Finance (No. 3) BillPage 110

(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.”

Finance (No. 3) BillPage 111

17 After Schedule 4 insert—

“Schedule 4AA Re-basing for non-residents in respect of UK land etc held on 5 April
2019

Part 1 5Introduction

1 (1) Part 2, 3 or 4 of this Schedule applies on the first occasion on which
a person disposes of an asset that the person held on 5 April 2019
where—

(a) the disposal is either a direct or indirect disposal of UK
10land, and

(b) the disposal is made by a non-resident or a UK resident in
the overseas part of a tax year.

(2) See also paragraph 16 (non-UK resident company holding UK
land becoming resident in UK after 5 April 2019).

(3) 15For the purposes of this Schedule—

(a) a disposal is a “direct disposal of UK land” if it is a disposal
of an interest in UK land, and

(b) a disposal by a person is an “indirect disposal of UK land”
if it is a disposal of an asset (other than an interest in UK
20land) deriving at least 75% of its value from UK land where
the person has a substantial indirect interest in that land.

(4) For the purposes of this paragraph, the disposal is made by a non-
resident or a UK resident in the overseas part of a tax year if it is—

(a) a disposal on which a gain accrues that falls to be dealt
25with by section 1A(3) because the asset disposed of is
within paragraph (b) or (c) of that subsection,

(b) a disposal on which a gain accrues that falls to be dealt
with by section 1A(1) in accordance with section 1G(2)
because the asset disposed of is within section 1A(3)(b) or
30(c),

(c) a disposal on which a gain accrues that falls to be dealt
with by section 2B(4), or

(d) a disposal of an asset on which a gain does not accrue but
which, had a gain accrued, would fall to be dealt with as
35mentioned in any of the preceding paragraphs of this sub-
paragraph.

Part 2 Indirect disposals and direct disposals not chargeable before 6 April
2019
40Introduction

2 (1) This Part of this Schedule applies to—

(a) all indirect disposals of UK land,

Finance (No. 3) BillPage 112

(b) direct disposals of UK land that were not fully residential
before 6 April 2019, and

(c) direct disposals of UK land by persons who were not
chargeable before 6 April 2019.

(2) 5For the purposes of this paragraph a direct disposal of UK land
made by a person was “not fully residential before 6 April 2019” if
in the period—

(a) beginning with the day on which the person acquired the
interest in land being disposed of or, if later, 6 April 2015,
10and

(b) ending with 5 April 2019,

there was no day on which the land to which the disposal relates
consisted of or included a dwelling.

(3) If the disposal is of an interest in land subsisting under a contract
15for the acquisition of land that, at any time before 6 April 2019,
consisted of or included a building to be constructed or adapted
for use as a dwelling, the disposal is taken to be fully residential
before that date.

(4) For the purposes of this paragraph, a disposal is made by a person
20who was not chargeable before 6 April 2019 if, immediately before
that date, the person was—

(a) a company which was not a closely-held company (see
sub-paragraph (5)),

(b) a widely-marketed scheme (see sub-paragraph (6)), or

(c) 25a company carrying on life assurance business (as defined
in section 56 of the Finance Act 2012) where the interest in
UK land was, immediately before that date, held for the
purpose of providing benefits to policyholders in the
course of that business.

(5) 30The question as to whether a company is “a closely-held
company” is determined in accordance with Part 1 of Schedule C1;
but if—

(a) the company is a divided company within the meaning of
section 14G, and

(b) 35the company would not otherwise be regarded as a
closely-held company,

the company is to be so regarded if the conditions in subsection (3)
of that section are met.

(6) A person is a “widely-marketed scheme” if—

(a) 40the person is a scheme within the meaning of section 14F,
and

(b) condition A or B in that section is met,

reading the reference in subsection (8)(a) of that section to the non-
resident CGT disposal as a reference to the disposal mentioned in
45paragraph 1(1).

(7) In determining for the purposes of this paragraph whether or
not—

(a) a person is a closely-held company, or

(b) a person is a widely-marketed scheme,

Finance (No. 3) BillPage 113

arrangements are to be ignored if the main purpose of, or one of
the main purposes of, them is to secure a tax advantage as a result
of the person not being a closely-held company or the person
being a widely-marketed scheme.

(8) 5In this paragraph—

(a) “arrangements” and “tax advantage” have the same
meaning as in section 16A, and

(b) any reference to section 14F, 14G or Schedule C1 are to
those provisions as they had effect on 5 April 2019 (before
10their repeal by Schedule 1 to the Finance Act 2019).

Re-basing to 5 April 2019

3 (1) In calculating the gain or loss accruing on the disposal it is be
assumed that the asset was on 5 April 2019 sold by the person, and
immediately reacquired by the person, at its market value on that
15date.

(2) This paragraph has effect subject to any election made by the
person under paragraph 4 (retrospective basis of calculation).

Election for retrospective basis of calculation

4 (1) The person may make an election under this paragraph for the
20assumption that the asset is sold and reacquired as mentioned in
paragraph 3 not to apply.

(2) If, in the case of an indirect disposal of UK land—

(a) a person makes an election under this paragraph, and

(b) a loss accrues on the disposal,

25the loss is not an allowable loss.

Calculation of residential property gain if election made under paragraph 4

5 (1) This paragraph applies if—

(a) a person makes an election under paragraph 4 in respect of
a disposal on which a gain accrues, and

(b) 30it is necessary to determine, in accordance with Schedule
1B, how much of the gain is a residential property gain.

(2) Paragraph 2 of Schedule 1B has effect as if—

(a) sub-paragraphs (5) and (6) of that paragraph were omitted,
and

(b) 35in that paragraph, “the applicable period” had the
definition given by the next sub-paragraph.

(3) “The applicable period” means the period—

(a) beginning with the day on which the person acquired the
interest in land being disposed of or, if later, 31 March
401982, and

(b) ending with the day before the day on which the disposal
is made.

Finance (No. 3) BillPage 114

Part 3 Direct disposals of Pre-April 2015 assets fully chargeable before 6
April 2019
Introduction

6 (1) 5This Part of this Schedule applies to any direct disposal of UK land
if—

(a) the person held the interest in UK land being disposed of
throughout the period beginning with 6 April 2015 and
ending with the disposal, and

(b) 10the disposal was fully residential before 6 April 2019.

(2) For this purpose a direct disposal of UK land made by a person is
“fully residential before 6 April 2019” if in the period—

(a) beginning with 6 April 2015, and

(b) ending with 5 April 2019,

15every day on which the land to which the disposal relates
consisted of a dwelling.

(3) If the disposal is of an interest in land subsisting under a contract
for the acquisition of land that, at any time in that period, did not
consist of a building to be constructed or adapted for use as a
20dwelling, the disposal is taken to be not fully residential before 6
April 2019.

(4) This Part of this Schedule does not apply to a direct disposal of UK
land made by a person who was not chargeable before 6 April
2019, as determined for the purposes of paragraph 2.

25Re-basing to 5 April 2015

7 (1) In calculating the gain or loss accruing on the disposal it is be
assumed that the asset was on 5 April 2015 sold by the person, and
immediately reacquired by the person, at its market value on that
date.

(2) 30This paragraph has effect subject to any election made by the
person under either—

(a) paragraph 8 (retrospective basis of calculation), or

(b) paragraph 9 (straight-line time apportionment),

(and an election may be made under only one of those
35paragraphs).

Election for retrospective basis of calculation

8 The person may make an election under this paragraph for the
assumption that the asset is sold and reacquired as mentioned in
paragraph 7 not to apply.

40Election for straight-line time apportionment

9 (1) The person may make an election under this paragraph—

Finance (No. 3) BillPage 115

(a) for the assumption that the asset is sold and reacquired as
mentioned in paragraph 7 not to apply, and

(b) for the gain or loss accruing on the disposal to be
apportioned so that only the post-5 April 2015 proportion
5of it is treated as accruing on the disposal.

(2) The “post-5 April 2015 proportion” is the proportion that the days
in the post-5 April 2015 period bear to the days in the ownership
period.

(3) For this purpose—

  • 10“the post-5 April 2015 period” means the day beginning with
    6 April 2015 and ending with the day on which the
    disposal is made, and

  • “the ownership period” means the period beginning with the
    day on which the person acquired the interest disposed of
    15or, if later, 31 March 1982 and ending with the day on
    which the disposal is made.

Calculation of residential property gain if election made under paragraph 8 or 9

10 (1) This paragraph applies if—

(a) a person makes an election under paragraph 8 in respect of
20a disposal on which a gain accrues, and

(b) it is necessary to determine, in accordance with Schedule
1B, how much of the gain is a residential property gain.

(2) Paragraph 2 of Schedule 1B has effect as if—

(a) sub-paragraphs (5) and (6) of that paragraph were omitted,
25and

(b) in that paragraph, “the applicable period” had the
definition given by the next sub-paragraph.

(3) “The applicable period” means the period—

(a) beginning with the day on which the person acquired the
30interest in land being disposed of or, if later, 31 March
1982, and

(b) ending with the day before the day on which the disposal
is made.

11 (1) This paragraph applies if—

(a) 35a person makes an election under paragraph 9 in respect of
a disposal on which a gain accrues, and

(b) it is necessary to determine, in accordance with Schedule
1B, how much of the gain is a residential property gain.

(2) Paragraph 2 of Schedule 1B has effect as if—

(a) 40sub-paragraphs (5) and (6) of that paragraph were omitted,
and

(b) in that paragraph, “the applicable period” had the
definition given by the next sub-paragraph.

(3) “The applicable period” means the period—

(a) 45beginning with 6 April 2015, and

Finance (No. 3) BillPage 116

(b) ending with the day before the day on which the disposal
is made.

Part 4 Direct disposals of assets partly chargeable before 6 April 2019
5Introduction

12 (1) This Part of this Schedule applies to any direct disposal of UK land
if—

(a) neither Part 2 nor Part 3 of this Schedule applies to the
disposal, and

(b) 10the interest in UK land being disposed of was not a post-
April 2015 asset that was fully residential before 6 April
2019.

(2) For this purpose—

(a) the interest in UK land being disposed of is a “post-April
152015 asset” if it was acquired by the person after 5 April
2015, and

(b) the asset “was fully residential before 6 April 2019” if, in
the period beginning with the day on which it was
acquired and ending with 5 April 2019, every day on
20which the land to which the disposal relates consisted of a
dwelling.

(3) If the disposal is of an interest in land subsisting under a contract
for the acquisition of land that, at any time in that period, did not
consist of a building to be constructed or adapted for use as a
25dwelling, the disposal is taken to be not fully residential before 6
April 2019.

Re-basing to 5 April 2015 and 5 April 2019

13 (1) In calculating the gain or loss accruing on the disposal (“the actual
disposal”) it is be assumed that—

(a) 30the asset was on 5 April 2015 sold by the person, and
immediately reacquired by the person, at its market value
on that date (but see sub-paragraph (3)), and

(b) in addition, the asset was on 5 April 2019 sold by the
person, and immediately reacquired by the person, at its
35market value on that date.

(2) In the case of the assumed sale on 5 April 2019, the gain or loss
accruing on that sale is treated as accruing on the actual disposal
(in addition to the gain or loss that actually accrues on the actual
disposal).

(3) 40If the asset was acquired by the person after 5 April 2015, the
assumption that it is sold, and immediately reacquired, on 5 April
2015 is not to apply.

(4) This paragraph has effect subject to any election made by the
person under paragraph 14 (retrospective basis of calculation).

Finance (No. 3) BillPage 117

Election for retrospective basis of calculation

14 The person may make an election under this paragraph for the
assumptions that the asset is sold and reacquired as mentioned in
paragraph 13 not to apply.

5Calculation of residential property gain if election made under paragraph 14

15 (1) This paragraph applies if—

(a) a person makes an election under paragraph 14 in respect
of a disposal on which a gain accrues, and

(b) it is necessary to determine, in accordance with Schedule
101B, how much of the gain is a residential property gain.

(2) Paragraph 2 of Schedule 1B has effect as if—

(a) sub-paragraphs (5) and (6) of that paragraph were omitted,
and

(b) in that paragraph, “the applicable period” had the
15definition given by the next sub-paragraph.

(3) “The applicable period” means the period—

(a) beginning with the day on which the person acquired the
interest in land being disposed of or, if later, 31 March
1982, and

(b) 20ending with the day before the day on which the disposal
is made.

Part 5 Miscellaneous
Companies with UK land becoming UK resident after 5 April 2019

16 (1) 25This paragraph applies in any case where—

(a) a company becomes resident in the United Kingdom after
5 April 2019,

(b) the company makes a direct or indirect disposal of UK
land after that date, and

(c) 30(ignoring this paragraph) Part 2, 3 or 4 of this Schedule
would have applied to the disposal but for the fact that it is
made at a time when the company is resident in the United
Kingdom.

(2) In that case, Part 2, 3 or 4 of this Schedule applies in relation to the
35disposal (regardless of paragraph 1(1)(b)).

Persons with UK land ceasing to be UK resident after 5 April 2019

17 (1) This paragraph applies in any case where—

(a) the trustees of a settlement cease to be resident in the
United Kingdom after 5 April 2019,

(b) 40after that date the trustees dispose of an asset held by them
on that date, and

(c) the disposal is a direct or indirect disposal of UK land.

Finance (No. 3) BillPage 118

(2) Nothing in Part 2, 3 or 4 of this Schedule applies to the disposal.

(3) The asset that is disposed of is excepted from the application of
section 80(2) (deemed disposal of assets on trustees ceasing to be
resident in UK).

18 (1) 5This paragraph applies in any case where—

(a) a company ceases to be resident in the United Kingdom
after 5 April 2019,

(b) after that date the company disposes of an asset held by it
on that date, and

(c) 10the disposal is a direct or indirect disposal of UK land.

(2) Nothing in Part 2, 3 or 4 of this Schedule applies to the disposal.

(3) The asset that is disposed of is excepted from the application of
section 185(2) and (3) (deemed disposal of assets on company
ceasing to be resident in UK).

15Wasting assets

19 (1) This paragraph applies if, in calculating a gain or loss accruing to
a person in a case where paragraph 3, 7 or 13 is applicable, it is
necessary to make a wasting asset determination in relation to the
asset disposed of.

(2) 20The assumption that the asset was acquired on a date mentioned
in paragraph 3, 7 or 13 (as the case may be) is to be ignored in
making that determination.

(3) In this paragraph “a wasting asset determination” means a
determination whether or not an asset is a wasting asset, as
25defined for the purposes of Chapter 2 of Part 2 of this Act.

Capital allowances

20 (1) This paragraph applies if, in calculating a gain or loss accruing to
a person in a case where paragraph 3, 7 or 13 is applicable, it is to
be assumed that the asset disposed of was acquired on a particular
30date for a consideration equal to its market value on that date.

(2) For the purposes of that calculation—

(a) section 41 (restriction of losses by reference to capital
allowances and renewals allowances), and

(b) section 47 (wasting assets qualifying for capital
35allowances),

are to apply in relation to any allowance made in respect of the
expenditure actually incurred in acquiring or providing the asset
as if it were made in respect of the expenditure assumed to have
been incurred.

(3) 40In this paragraph “allowance” means any capital allowance or
renewals allowance.

Finance (No. 3) BillPage 119

Making of elections

21 (1) An election under any provision of this Schedule must (regardless
of section 42(2) of the Management Act) be made by being
included in a relevant return relating to the disposal.

(2) 5For the purposes of this paragraph a “relevant return” means—

(a) an ordinary tax return, or

(b) a return under Schedule 2 to the Finance Act 2019.

(3) An election under any provision of this Schedule which is made
by being included in a return under Schedule 2 to the Finance Act
102019 may be subsequently revoked by provision included in an
ordinary tax return which is delivered on or before the filing date
for the ordinary tax return.

(4) Subject to that, an election under any provision of this Schedule is
irrevocable.

(5) 15All such adjustments are to be made, whether by way of discharge
or repayment of tax, the making of assessments or otherwise, as
are required to give effect to an election under any provision of
this Schedule.

(6) For the purposes of this paragraph, in the case of a person other
20than a company—

  • “ordinary tax return” means a return under section 8 or 8A of
    the Management Act, and

  • “the filing date”, in relation to that return, has the meaning
    given by section 9A(6) of that Act.

(7) 25For the purposes of this paragraph, in the case of a company—

  • “ordinary tax return” means a company tax return under
    Schedule 18 to the Finance Act 1998, and

  • “the filing date”, in relation to that return, has the meaning
    given by paragraph 14 of that Schedule.

(8) 30For the purposes of this paragraph—

(a) the reference to an election being included in a relevant
return includes its being included as a result of an
amendment of the return, and

(b) the reference to the revocation of an election being
35included in an ordinary tax return includes its being
included as a result of an amendment of the return.

Interpretation

22 (1) In this Schedule—

(a) any reference to an interest in UK land is to be read in
40accordance with section 1C (and any reference to land is to
be read in accordance with that section), and

(b) any reference to an asset (other than an interest in UK land)
deriving at least 75% of its value from UK land where a
person has a substantial indirect interest in that land is to
45be read in accordance with Schedule 1A.