Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
194

5
In section 809Q (sections 809L and 809P: transfers from mixed funds), after
subsection (1) insert—
“(1A)
But this section must be read subject to section 809RA.”
6
After section 809R insert—
“809RA
Special mixed fund rules for certain employment cases
5
(1)
This section applies if—
(a)
an individual has general earnings from an employment for
a tax year,
(b)
those earnings include both general earnings within section
15(1) of ITEPA 2003 (“section 15(1) earnings”) and general
10
earnings within section 26(1) of that Act (“section 26(1)
earnings”),
(c)
at least some of the section 15(1) earnings, or sums deriving
(wholly or in part, and directly or indirectly) from at least
some of the section 15(1) earnings, are paid into an account in
15
that tax year at a time (a “relevant time”) when the account is
a qualifying account of the individual, and
(d)
at least some of the section 26(1) earnings, or sums deriving
(wholly or in part, and directly or indirectly) from at least
some of the section 26(1) earnings, are also paid into the
20
account in that tax year at a relevant time.
(2)
If this section applies, the composition of each transfer made from
the account in that tax year at a relevant time is to be determined as
follows—

Step 1 Suppose that all the condition A transfers made from the
25
account in the tax year at a relevant time had been a single transfer
made from the account at the end of the tax year.

Step 2 Suppose that all the other transfers made from the account in
the tax year at a relevant time had been a single offshore transfer
made at the end of the tax year immediately after the single transfer
30
mentioned in step 1.

Step 3 Applying those suppositions—
(a)
find under section 809Q(3) the extent to which the single
transfer mentioned in step 1 is of the individual’s income or
chargeable gains, and
35
(b)
find under section 809R(4) the content of the single offshore
transfer mentioned in step 2.

Step 4 Each transfer made from the account in the tax year at a
relevant time is to be treated as containing the specified proportion
of each kind of income or capital contained in the relevant deemed
40
transfer.

“The specified proportion” is the amount of the transfer divided by
the amount of the relevant deemed transfer.

“The relevant deemed transfer” is—
(a)
if the transfer is a condition A transfer, the single transfer
45
mentioned in step 1, and
(b)
otherwise, the single offshore transfer mentioned in step 2.
(3)
Subsection (2) applies in determining the composition of a transfer
for the purposes of sections 809Q and 809R but it does not otherwise

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
195

affect the date on which a transfer is considered to occur for the
purposes of this Chapter.
(4)
If the tax year is the tax year in which the account becomes a
qualifying account, for the purpose of applying section 809Q(3) in
relation to the single transfer mentioned in step 1 of subsection (2),
5
treat the part of the tax year falling before the qualifying date for the
account as a separate tax year.
(5)
If the account ceases to be a qualifying account of the individual
during the tax year other than as a result of a breach of the deposit
rule—
10
(a)
subsection (2) has effect as if references to the end of the tax
year were to the end of the day on which the account ceases
to be a qualifying account, and
(b)
for the purpose of applying section 809Q(3) in relation to the
single transfer mentioned in step 1 of subsection (2), treat the
15
part of the tax year falling after the day mentioned in
paragraph (a) as a separate tax year.
(6)
A transfer from the account is a “condition A transfer” if and to the
extent that—
(a)
condition A in section 809L is met, and
20
(b)
either—
(i)
the property or consideration for the service is
(wholly or in part), or derives (wholly or in part, and
directly or indirectly) from, the transfer, or
(ii)
the transfer, or anything deriving (wholly or in part,
25
and directly or indirectly) from the transfer, is used as
mentioned in section 809L(3)(c).
(7)
A transfer from the account is an “other transfer” if and to the extent
that it is not a condition A transfer.
(8)
Treat a transfer as an “other transfer” if and to the extent that, at the
30
end of the tax year—
(a)
it is not a condition A transfer, and
(b)
on the basis of the best estimate that can reasonably be made
at that time, it will not become a condition A transfer.
(9)
If the account ceases to be a qualifying account of the individual
35
during the tax year other than as a result of a breach of the deposit
rule, subsection (8) has effect as if the reference to the end of the tax
year were to the end of the day on which the account ceases to be a
qualifying account.
(10)
“Qualifying account” and “the qualifying date” for an account are
40
defined in section 809RB.
(11)
For the purposes of this section and sections 809RB to 809RD—
(a)
“employment” is to be read in accordance with section 4(1) of
ITEPA 2003, and includes an office (as read in accordance
with section 5(3) of that Act),
45
(b)
whether general earnings are “for” a tax year is to be
determined as for the purposes of the employment income
Parts of ITEPA 2003 (see section 3(2) of that Act),

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
196

(c)
a reference to anything “paid into” an account includes
anything credited to the account by whatever means, and
(d)
references to a breach of the deposit rule are to be read in
accordance with section 809RC.
809RB
Qualifying accounts
5
(1)
An individual may by notice to the Commissioners nominate an
account to be a qualifying account of the individual for the purposes
of section 809RA.
(2)
The notice must specify the qualifying date for the account.
(3)
“The qualifying date” for the account is the first date on which there
10
is paid into the account sums falling within subsection (4) which (in
total) are more than £10.
(4)
A sum falls within this subsection if it is, or derives wholly (whether
directly or indirectly) from, general earnings of the individual from
an employment for a tax year which is a relevant tax year in relation
15
to the employment.
(5)
A tax year is a “relevant” tax year in relation to an employment if the
general earnings which the individual has for the tax year from the
employment include both general earnings within section 15(1) of
ITEPA 2003 and general earnings within section 26(1) of that Act.
20
(6)
The individual may withdraw the nomination by giving a further
notice to the Commissioners, specifying the date with effect from
which the nomination is withdrawn.
(7)
A notice under subsection (1) or (6) must be in writing and include
such information as the Commissioners may reasonably require.
25
(8)
A notice under subsection (1) or (6) must be given no later than—
(a)
31 January in the tax year following the tax year in which
falls, as the case may be—
(i)
the qualifying date for the account, or
(ii)
the date with effect from which the nomination is
30
withdrawn, or
(b)
such later date as the Commissioners may allow.
(9)
If an individual nominates an account under this section, the account
is a “qualifying account” of the individual throughout the period—
(a)
beginning with the qualifying date, and
35
(b)
ending with the date before the earliest of the following
dates—
(i)
the date on which the account is closed or ceases to be
an ordinary bank account held by and for the benefit
of the individual (alone or jointly with others);
40
(ii)
the date with effect from which the nomination is
withdrawn under this section;
(iii)
the qualifying date for another qualifying account of
the individual;
(iv)
6 April in a tax year in which there is a breach of the
45
deposit rule which is not remedied or cannot be
remedied;

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
197

(v)
6 April in a tax year for which the individual has no
general earnings within section 26(1) of ITEPA 2003.
(10)
The account is not to be a qualifying account at all if—
(a)
at any time on the qualifying date, the account is not an
ordinary bank account held by and for the benefit of the
5
individual (alone or jointly with others), or
(b)
immediately before the qualifying date, the account has a
credit balance of more than £10.
(11)
The account is not to be a qualifying account at all if the qualifying
date falls in a tax year—
10
(a)
for which the individual has no general earnings within
section 26(1) of ITEPA 2003, or
(b)
in which there is a breach of the deposit rule which is not
remedied or cannot be remedied.
(12)
Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the
15
breach occurs on or after a date falling within subsection (9)(b)(i) to
(iii).
(13)
If, apart from this subsection, an individual might have nominated
two or more accounts for which the qualifying date would be the
same, the individual may nominate only one of those accounts.
20
(14)
If, apart from this subsection, an account would be a qualifying
account of two or more individuals at any time, it is not to be a
qualifying account of either or any of them at that time or any other
time.
(15)
For the purposes of this section an account is an “ordinary bank
25
account” if it is a cash account in a bank (whether a current or savings
account) where sums standing to the credit of the account from time
to time represent a debt owed by the bank to the account-holder.
809RC
Breaches of the deposit rule
(1)
There is a breach of the deposit rule if a prohibited sum is paid into
30
the account on or after the qualifying date.
(2)
A breach of the deposit rule is remedied if, within 30 days beginning
with the day on which the individual became or ought reasonably to
have become aware of the payment of the prohibited sum, the
required amount is transferred out of the account by way of a single
35
one-off transfer.
(3)
“The required amount” is an amount equal to—
(a)
the prohibited sum, plus
(b)
all the other prohibited sums (if any) that have been paid into
the account since that sum was paid in.
40
(4)
If there are 3 breaches of the deposit rule in any 12 month period,
subsection (2) does not apply to the third breach and, accordingly,
the third breach cannot be remedied.
(5)
The payment of a prohibited sum (“the later prohibited sum”) into
the account does not result in a breach of the deposit rule if—
45

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
198

(a)
a breach resulting from an earlier payment of a prohibited
sum into the account is remedied, and
(b)
the later prohibited sum is represented by the required
amount in relation to that breach.
(6)
A “prohibited sum” is anything other than a sum that is, or derives
5
wholly (whether directly or indirectly) from, any of the following
kinds of income or capital—
(a)
general earnings of the individual from an employment for a
tax year which is a relevant tax year in relation to the
employment,
10
(b)
general earnings of the individual from an employment
which consist of money and are paid in a tax year which is a
relevant tax year in relation to the employment,
(c)
an amount of specific employment income which, by virtue
of Part 6, 7 or 7A of ITEPA 2003 or any other enactment,
15
counts as employment income of the individual in respect of
an employment for a tax year which is a relevant tax year in
relation to the employment,
(d)
interest on the account, or
(e)
consideration for the disposal of employment-related
20
securities or employment-related securities options in the
circumstances described in subsection (7).
(7)
The circumstances are—
(a)
the securities or options were acquired pursuant to a right or
opportunity available by reason of an employment of the
25
individual,
(b)
the disposal is or occurs in conjunction with, or as soon as
reasonably practicable after, a relevant event involving those
securities or options, and
(c)
the tax year in which the relevant event occurs is a relevant
30
tax year in relation to the employment.
(8)
For the purposes of subsection (7) each of the following is a “relevant
event”—
(a)
the acquisition mentioned in subsection (7)(a), and
(b)
any event on the occurrence of which an amount (if positive)
35
counts as employment income by virtue of Part 7 of ITEPA
2003 or would do so but for—
(i)
section 421E or 474 of that Act (exclusions: residence
etc), or
(ii)
an election under section 430 or 431 of that Act.
40
(9)
For the purposes of this section a tax year is a “relevant” tax year in
relation to an employment if—
(a)
the individual has general earnings from the employment for
the tax year,
(b)
those earnings include both general earnings within section
45
15(1) of ITEPA 2003 (“section 15(1) earnings”) and general
earnings within section 26(1) of that Act (“section 26(1)
earnings”),
(c)
at least some of the section 15(1) earnings, or sums deriving
(wholly or in part, and directly or indirectly) from at least
50

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 3 — Commencement
199

some of the section 15(1) earnings, are paid into the account
in the tax year, and
(d)
at least some of the section 26(1) earnings, or sums deriving
(wholly or in part, and directly or indirectly) from at least
some of the section 26(1) earnings, are also paid into the
5
account in the tax year.
(10)
For the purposes of this section—
(a)
“employment-related securities” has the meaning given in
section 421B(8) of ITEPA 2003, and
(b)
“employment-related securities options” has the meaning
10
given in section 471(5) of that Act.
809RD
Effect where 30-day deadline is met
(1)
This section applies if the required amount in relation to a breach of
the deposit rule was transferred out of the account in accordance
with section 809RC(2).
15
(2)
Sections 809Q and 809R have effect as if—
(a)
the intervening transactions had never taken place, and
(b)
each prohibited sum represented by the required amount
had instead been transferred directly (at the time that sum
was paid into the qualifying account) into the account or
20
other property into which the required amount was
transferred by virtue of the single one-off transfer.
(3)
Each of the following is an “intervening transaction”—
(a)
each payment into the qualifying account of a prohibited sum
represented by the required amount, and
25
(b)
the single one-off transfer out of the qualifying account.
(4)
If it is supposed under step 1 or 2 of section 809RA(2) that a single
transfer had been made in the intervening period, re-apply section
809Q or 809R in relation to that transfer taking account of subsection
(2).
30
(5)
“The intervening period” is the period—
(a)
beginning with the day on which the breach occurred, and
(b)
ending with the day on which the single one-off transfer was
made in accordance with section 809RC(2).
(6)
If more than one transfer of a sum equal to the required amount was
35
transferred out of the qualifying account within the 30-day grace
period, the first of those transfers is assumed to be the single one-off
transfer.
(7)
“The 30-day grace period” is the period of 30 days mentioned in
section 809RC(2).”
40
Part 3
Commencement
7
The amendments made by Part 1 of this Schedule have effect in relation to
earnings for the tax year 2013-14 and subsequent tax years.

Finance Bill
Schedule 7 — Remittance basis: exempt property
200

8
The amendments made by Part 2 of this Schedule have effect in relation to
transfers from a mixed fund that are made in the tax year 2013-14 or any
subsequent tax year.
Schedule 7
Section 20

Remittance basis: exempt property
5
1
Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.
2
In section 809X(3) (exempt property: public access rule), for “sections 809Z
and 809Z1)” substitute “section 809Z)”.
3     (1)
Section 809Y (property that ceases to be exempt property treated as
remitted) is amended as follows.
10
      (2)
In subsection (2), for “either” substitute “any”.
      (3)
After subsection (4) insert—
“(4A)
Where exempt property has been lost, stolen or destroyed, the first
and second cases do not apply in relation to the property during any
period—
15
(a)
beginning with the time at which it was lost, stolen or
destroyed, and
(b)
(if lost or stolen) ending with the time at which it is recovered.
(4B)
The third case is where a compensation payment is released in
respect of exempt property that has been lost, stolen or destroyed.”
20
      (4)
In subsection (6), after “exempt property” insert “by virtue of the first or
second case”.
4
After section 809YE insert—
“809YF
Exception to section 809Y: compensation taken offshore or invested
(1)
Section 809Y(1) does not apply to property if—
25
(a)
it ceases to be exempt property because a compensation
payment in respect of it is released, and
(b)
conditions A and B are met.
(2)
Condition A is that the whole of the compensation payment is taken
offshore or used by a relevant person to make a qualifying
30
investment within the period of 45 days beginning with the day on
which the payment is released.
(3)
Condition B is that, if Condition A is satisfied wholly or in part by
using the compensation payment to make a qualifying investment,
the remittance basis user makes a claim for relief under subsection
35
(4) on or before the first anniversary of the 31 January following the
tax year in which the payment is released.
(4)
If section 809Y(1) does not apply to property by virtue of subsection
(1), the income and gains treated under section 809X as not remitted
to the United Kingdom continue to be treated after the compensation
40