Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
545

“CAA allowances” means allowances treated under section 250
or 250A of CAA 2001 (capital allowances for overseas
property businesses) as an expense of the business;
“CAA charges” means charges treated under either of those
sections as a receipt of the business;
5
“non-CAA profits” means profits before account is taken of any
CAA allowances or CAA charges.”
Special charging rules for savings and investment income
82
Part 4 of ITTOIA 2005 (savings and investment income) is amended as
follows.
10
83
In section 368 (territorial scope of charges in respect of savings and
investment income), after subsection (2) insert—
“(2A)
If income arising to an individual who is UK resident arises in the
overseas part of a split year, it is to be treated for the purposes of this
section as arising to a non-UK resident.”
15
84
In section 465 (person liable for tax on gains from life insurance etc:
individuals), after subsection (1) insert—
“(1A)
But if the tax year is a split year as respects the individual, the
individual is not liable for tax under this Chapter in respect of gains
arising in the overseas part of that year (subject to section 465B).”
20
85
In section 467 (person liable: UK resident trustees), in subsection (4), after
paragraph (a) insert—
“(aa)
is UK resident but the gain arises in the overseas part of a tax
year that is, as respects the person who created the trusts, a
split year,”.
25
86    (1)
Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK
resident policy holders) is amended as follows.
      (2)
The amendments made by sub-paragraphs (3) to (6) apply to section 528 as
substituted by paragraph 3 of Schedule 8 to this Act, and have effect in
relation to policies and contracts in relation to which that section as so
30
substituted has effect.
      (3)
In subsection (1)(b), for the words from “on which” to the end substitute
“that are foreign days”.
      (4)
After subsection (1) insert—
“(1A)
“Foreign days” are—
35
(a)
days falling within any tax year for which the individual is
not UK resident, and
(b)
days falling within the overseas part of any tax year that is a
split year as respects the individual.”
      (5)
In subsection (3), in the definition of “A”, for “days falling within subsection
40
(1)(b)” substitute “foreign days”.
      (6)
In subsection (8), for “subsection (1)(b)” substitute “subsection (1A)(a) and
(b)”.

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
546

      (7)
The amendments made by sub-paragraphs (8) to (10) apply to section 528 as
in force immediately before the substitution mentioned in sub-paragraph (2)
so far as that section as so in force continues to have effect after the
substitution.
      (8)
In subsection (1), for the words from “the policy holder” to the end substitute
5
“there are one or more days in the policy period that are foreign days.”
      (9)
After that subsection insert—
“(1A)
“Foreign days” are—
(a)
days on which the policy holder is not UK resident, and
(b)
days falling within the overseas part of any tax year that is a
10
split year as respects the policy holder (if the policy holder is
an individual).”
     (10)
In subsection (3), in the definition of “A”, for the words from “on which” to
the end substitute “in the policy period that are foreign days, and”.
87    (1)
Section 528A (reduction in amount charged on basis of non-UK residence of
15
deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is
amended as follows.
      (2)
In subsection (1)(b), for the words from “on which” to the end substitute
“that were foreign days”.
      (3)
In subsection (2)—
20
(a)
in paragraph (b), for the words from “on which” to the end substitute
“that were foreign days, and”, and
(b)
for paragraph (c), substitute—
“(c)
the deceased died—
(i)
in a tax year for which the deceased was UK
25
resident but not one that was a split year as
respects the deceased, or
(ii)
in the UK part of a tax year that was a split
year as respects the deceased.”
      (4)
After that subsection insert—
30
“(2A)
“Foreign days” are—
(a)
days falling within any tax year for which the deceased was
not UK resident, and
(b)
days falling within the overseas part of any tax year that was
a split year as respects the deceased.”
35
      (5)
In subsection (4), in the definition of “A”, for the words from “are days
falling” to the end substitute “were foreign days, and”.
      (6)
In subsection (8), for “subsection (1)(b) or (2)(b)” substitute “subsection
(2A)(a) and (b)”.
88    (1)
Section 536 (top slicing relieved liability: one chargeable event) is amended
40
as follows.
      (2)
The amendment made by sub-paragraph (3) applies to section 536 as
amended by paragraph 5 of Schedule 8 to this Act, and has effect in
accordance with paragraph 7 of that Schedule.

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
547

      (3)
For subsection (7) substitute—
“(7)
If in the case of the individual the gain is reduced under section 528—
(a)
divide the number of foreign days in the material interest
period (as determined in accordance with that section,
including subsections (7) and (8)) by 365,
5
(b)
if the result is not a whole number, round it down to the
nearest whole number, and
(c)
reduce N, for steps 1 and 3 in subsection (1), by the number
found by applying paragraphs (a) and (b).”
      (4)
The amendment made by sub-paragraph (5) applies to section 536 as in force
10
immediately before it is amended by paragraph 5 of Schedule 8 to this Act,
so far as that section as so in force continues to have effect after it is so
amended.
      (5)
For subsection (7) substitute—
“(7)
If the gain is from such a policy—
15
(a)
divide the number of foreign days in the policy period (as
defined in section 528) by 365,
(b)
if the result is not a whole number, round it down to the
nearest whole number, and
(c)
reduce N, for steps 1 and 3 in subsection (1), by the number
20
found by applying paragraphs (a) and (b).”
Special charging rules for miscellaneous income
89
In section 577 (territorial scope of charges in respect of miscellaneous
income), after subsection (2) insert—
“(2A)
If income arising to an individual who is UK resident arises in the
25
overseas part of a split year, it is to be treated for the purposes of this
section as arising to a non-UK resident.”
Special charging rules for relevant foreign income charged on remittance basis
90
In section 832 of ITTOIA 2005 (relevant foreign income charged on
remittance basis), for subsection (2) substitute—
30
“(2)
For any tax year for which the individual is UK resident, income tax
is charged on the full amount of so much (if any) of the relevant
foreign income as is remitted to the United Kingdom—
(a)
in that year, or
(b)
in the UK part of that year, if that year is a split year as
35
respects the individual.”
91    (1)
Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as
follows in consequence of the amendment made by the preceding
paragraph.
      (2)
In section 726 (non-UK domiciled individuals to whom remittance basis
40
applies), after subsection (4) insert—
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
548

      (3)
In section 730 (non-UK domiciled individuals to whom remittance basis
applies), after subsection (4) insert—
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”
5
      (4)
In section 735 (non-UK domiciled individuals to whom remittance basis
applies), after subsection (4) insert—
“(5)
In the application of section 832 of ITTOIA 2005 to the foreign
deemed income, subsection (2) of that section has effect with the
omission of paragraph (b).”
10
Special charging rules for capital gains
92
TCGA 1992 is amended as follows.
93    (1)
Section 2 (persons and gains chargeable to capital gains tax, and allowable
losses) is amended as follows.
      (2)
After subsection (1A) (inserted by Schedule 46 to this Act) insert—
15
“(1B)
If the year is a split year as respects an individual, the individual is
not chargeable to capital gains tax in respect of any chargeable gains
accruing to the individual in the overseas part of that year.
(1C)
But subsection (1B)—
(a)
does not apply to chargeable gains in respect of which the
20
individual would have been chargeable to capital gains tax
under section 10, had the individual been not resident in the
UK for the year, and
(b)
is without prejudice to section 10A.”
      (3)
In subsection (2)—
25
(a)
after “the year of assessment” insert “or, where subsection (1B)
applies, the UK part of that year”, and
(b)
in paragraph (a), after “that year of assessment” insert “or that part
(as the case may be)”.
94    (1)
Section 3A (reporting limits) is amended as follows.
30
      (2)
In subsection (1)—
(a)
in paragraph (a), after “year of assessment” insert “or, if that year is
a split year as respects the individual, the UK part of that year”, and
(b)
in paragraph (b), after “in that year” insert “or, as the case may be,
that part of the year”.
35
      (3)
In subsection (2), after “year of assessment” insert “(or the UK part of such a
year)”.
95    (1)
Section 12 (non-UK domiciled individuals to whom remittance basis
applies) is amended as follows.
      (2)
After subsection (2) insert—
40
“(2A)
If that tax year is a split year as respects the individual, the
chargeable gains are treated as accruing to the individual in the part

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
549

of the year (the overseas part or the UK part) in which the foreign
chargeable gains are so remitted.”
      (3)
In subsection (3), after “that year” insert “or, where applicable, that part of
the year”.
96
In section 13 (attribution of gains to members of non-resident companies),
5
after subsection (3) insert—
“(3A)
Subsection (2) does not apply in the case of a participator who is an
individual if—
(a)
the tax year in which the chargeable gain accrues to the
company is a split year as respects the participator, and
10
(b)
the chargeable gain accrues to the company in the overseas
part of that year.”
97
In section 16 (computation of losses), after subsection (3) insert—
“(3A)
If the person is an individual and the year is a split year as respects
that individual, subsection (3) also applies to a loss accruing to the
15
individual in the overseas part of that year.”
98
In section 16ZB (individual who has made election under section 16ZA:
foreign chargeable gains remitted in tax year after tax year in which accrue),
in subsection (1)(c), after “tax year” insert “or a part of the applicable tax
year”.
20
99    (1)
Section 16ZC (individual who has made election under section 16ZA and to
whom remittance basis applies) is amended as follows.
      (2)
In subsection (3)—
(a)
in paragraph (a), after “that year” insert “or, if that year is a split year
as respects the individual, in the UK part of that year”, and
25
(b)
in paragraph (b), after “that year” insert “or they are so remitted in
that year but it is a split year as respects the individual and they are
so remitted in the overseas part of the year”.
      (3)
In subsection (7), in the definition of “relevant allowable losses”, after “tax
year” insert “or a part of the tax year”.
30
100
In section 86 (attribution of gains to settlors with interest in non-resident or
dual resident settlements), in subsection (4)(a), after “the year” insert “or if,
as respects the settlor, the year is a split year, in the UK part of that year”.
101
In section 87 (non-UK resident settlements: attribution of gains to
beneficiaries), after subsection (6) insert—
35
“(7)
If the relevant tax year is a split year as respects a beneficiary of the
settlement—
(a)
the amount on which the beneficiary is chargeable to capital
gains tax by virtue of this section for that year (in respect of
the settlement) is a portion of the amount on which the
40
beneficiary would have been so chargeable if the relevant tax
year had not been a split year, and
(b)
the portion is the portion attributable to the UK part of the
relevant tax year calculated on a time apportionment basis.”

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
550

Trustees of a settlement
102
In section 69 of TCGA 1992 (trustees of settlements), after subsection (2D)
insert—
“(2DA)
A trustee who is resident in the United Kingdom for a tax year is to
be treated for the purposes of subsections (2A) and (2B) as if he or she
5
were not resident in the United Kingdom for that year if—
(a)
the trustee is an individual,
(b)
the individual becomes or ceases to be a trustee of the
settlement during the tax year,
(c)
that year is a split year as respects the individual, and
10
(d)
in that year, the only period when the individual is a trustee
of the settlement falls wholly within the overseas part of the
year.
(2DB)
Subsection (2DA) is subject to subsection (2D) and, accordingly, an
individual who is treated under subsection (2DA) as not resident is,
15
in spite of that, to be regarded as resident whenever the individual
acts as mentioned in subsection (2D).”
103
In section 475 of ITA 2007 (residence of trustees), after subsection (6) insert—
“(7)
Subsection (8) applies if—
(a)
an individual becomes or ceases to be a trustee of the
20
settlement during a tax year,
(b)
that year is a split year as respects the individual, and
(c)
the only period in that year when the individual is a trustee
of the settlement falls wholly within the overseas part of the
year.
25
(8)
The individual is to be treated for the purposes of subsections (4) and
(5) as if he or she had been non-UK resident for the year (and hence
for the period in that year when he or she was a trustee of the
settlement).
(9)
But subsection (8) is subject to subsection (6) and, accordingly, an
30
individual who is treated under subsection (8) as having been non-
UK resident is, in spite of that, to be treated as UK resident whenever
the individual acts as mentioned in subsection (6).”
Definitions in enactments relating to income tax and CGT
104   (1)
Section 288 of TCGA 1992 (interpretation) is amended as follows.
35
      (2)
In subsection (1), insert the following definition in the appropriate place—
““split year”, as respects an individual, means a tax year that, as
respects that individual, is a split year within the meaning of
Part 3 of Schedule 45 to the Finance Act 2013 (statutory
residence test: split year treatment);”.
40
      (3)
After subsection (1ZA) insert—
“(1ZB)
A reference in this Act to “the overseas part” or “the UK part” of a
split year is to be read in accordance with Part 3 of Schedule 45 to the
Finance Act 2013 (statutory residence test: split year treatment).”

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
551

105
In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), insert
the following entries in the appropriate places—

“the overseas part
section 989 of ITA 2007”,

“split year
section 989 of ITA 2007”,

and

5

“the UK part
section 989 of ITA 2007”.

106
In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), insert
the following entries in the appropriate places—

“the overseas part
section 989 of ITA 2007”,

“split year
section 989 of ITA 2007”,

10

and

“the UK part
section 989 of ITA 2007”.

107
In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts),
insert the following definitions in the appropriate places—
““the overseas part”, in relation to a split year, has the meaning
15
given in Part 3 of Schedule 45 to FA 2013 (statutory residence
test: split year treatment);”,
““split year”, in relation to an individual, means a tax year that,
as respects that individual, is a split year within the meaning
of Part 3 of Schedule 45 to FA 2013 (statutory residence test:
20
split year treatment);”, and
““the UK part”, in relation to a split year, has the meaning given
in Part 3 of Schedule 45 to FA 2013 (statutory residence test:
split year treatment);”.
108
In Schedule 4 to that Act (index of defined expressions), insert the following
25
entries in the appropriate places—

“the overseas part
section 989”,

“split year
section 989”, and

“the UK part
section 989”.

Part 4
30
Anti-avoidance
Introduction
109
This Part of this Schedule—
(a)
explains when an individual is to be regarded for the purposes of
certain enactments as temporarily non-resident,
35