Finance Bill

House of Lords

Session 2013 - 14
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
559

payment under section 87A for any year prior to the year of return
(but not so as to reduce the section 2(2) amount below zero).
(8)
In this section—
(a)
“the settlement” means the settlement in relation to which the
settlor mentioned in subsection (1)(a) is a settlor,
5
(b)
a reference to “the settlors” or “each settlor” is to the settlors
or each settlor in relation to the settlement,
(c)
“period of return” and “year of return” have the same
meanings as in section 10A, and
(d)
paragraph 8 of Schedule 5 applies in construing the reference
10
to property originating from the settlor.”
121
In section 96 (payment by and to companies), in subsection (9A), for the
words from “which in his case” to the end substitute “for which he or she
was not so resident if—
(a)
section 10A applies to him or her, and
15
(b)
the year falls within the temporary period of non-residence.”
122   (1)
Section 279B (deferred unascertainable consideration: supplementary
provisions) is amended as follows.
      (2)
In subsection (7), for “year of return” substitute “period of return”.
      (3)
In subsection (8)(a) and (b), for “year” substitute “period”.
20
123   (1)
Schedule 4C (transfers of value: attribution of gains to beneficiaries) is
amended as follows.
      (2)
In paragraph 6(1)(b), for “year of return” substitute “period of return”.
      (3)
In paragraph 12(1)—
(a)
for paragraph (a) substitute—
25
“(a)
by virtue of section 10A, an amount of chargeable
gains within section 86(1)(e) that accrued in a tax
year (“year A”) to the trustees of a settlement
would be treated as accruing to a person (“the
settlor”) in the period of return, and”, and
30
(b)
in paragraph (b), for “the intervening year” substitute “year A”.
      (4)
In paragraph 12(2), for “year of return” substitute “period of return”.
      (5)
In paragraph 12A(1)—
(a)
for “year of return” substitute “period of return”, and
(b)
for “an intervening year” substitute “the temporary period of non-
35
residence”.
New special rule: lump sum payments under pension schemes etc
124
ITEPA 2003 is amended as follows.
125
In Chapter 2 of Part 6 (employer-financed retirement benefits), after section
394 insert—
40
“394A
Temporary non-residents
(1)
This section applies if an individual is temporarily non-resident.

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
560

(2)
Any benefits within subsection (3) are to be treated for the purposes
of section 394(1) as if they were received by the individual in the
period of return.
(3)
A benefit is within this subsection if—
(a)
this Chapter applies to it,
5
(b)
it is in the form of a lump sum,
(c)
it is received by the individual in the temporary period of
non-residence, and
(d)
ignoring this section—
(i)
no charge to tax arises by virtue of section 394(1) in
10
respect of it, but
(ii)
such a charge would arise if the existence of any
double taxation relief arrangements were
disregarded.
(4)
Subsection (3)(d)(i) includes a case where the charge could be
15
prevented by making a DTR claim, even if no claim is in fact made.
(5)
Subsection (2) does not affect the operation of section 394(1A) (and,
accordingly, “the relevant tax year” for the purposes of section
394(1A) remains the tax year in which the benefit is actually
received).
20
(6)
Nothing in any double taxation relief arrangements is to be read as
preventing the individual from being chargeable to income tax in
respect of any benefit treated by virtue of this section as received in
the period of return (or as preventing a charge to that tax from
arising as a result).
25
(7)
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-
avoidance) explains—
(a)
when an individual is to be regarded as “temporarily non-
resident”, and
(b)
what “the temporary period of non-residence” and “the
30
period of return” mean.
(8)
In this section—
“double taxation relief arrangements” means arrangements that
have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that
35
Act.”
126
In Chapter 2 of Part 7A (employment income provided through third
parties: treatment of relevant step for income tax purposes), after section
554Z4 insert—
“554Z4A
Temporary non-residents
40
(1)
This section applies if A is temporarily non-resident.
(2)
Any relevant step within subsection (3) is to be treated for the
purposes of section 554Z2 as if it were taken in the period of return.
(3)
A relevant step is within this subsection if—
(a)
it is the payment of a lump sum to a relevant person (see
45
section 554C(2)),

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
561

(b)
the lump sum is a relevant benefit provided under a relevant
scheme,
(c)
the step is taken in the temporary period of non-residence,
and
(d)
ignoring this section—
5
(i)
no charge to tax arises by virtue of section 554Z2 by
reason of the step, but
(ii)
such a charge would arise if the existence of any
double taxation relief arrangements were
disregarded.
10
(4)
Subsection (3)(d)(i) includes a case where the charge could be
prevented by making a DTR claim, even if no claim is in fact made.
(5)
Nothing in any double taxation relief arrangements is to be read as
preventing A from being chargeable to income tax in respect of any
relevant step treated by virtue of this section as taken in the period
15
of return (or as preventing a charge to that tax from arising as a
result).
(6)
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-
avoidance) explains—
(a)
when an individual is to be regarded as “temporarily non-
20
resident”, and
(b)
what “the temporary period of non-residence” and “the
period of return” mean.
(7)
In this section—
“double taxation relief arrangements” means arrangements that
25
have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part
6;
“relevant scheme” means an employer-financed retirement
30
benefits scheme (within the meaning of that Chapter) or a
superannuation fund to which section 615(3) of ICTA
applies.”
127
In that Chapter, after section 554Z11 insert—
“554Z11A
Temporary non-residents
35
(1)
This section applies if A is temporarily non-resident.
(2)
Any amount within subsection (3) is to be treated for the purposes of
section 554Z9(2) or (as the case may be) 554Z10(2) as if it were
remitted to the United Kingdom in the period of return.
(3)
An amount is within this subsection if—
40
(a)
it is all or part of a relevant benefit provided to a relevant
person (see section 554C(2)) under a relevant scheme,
(b)
it is provided in the form of the lump sum,
(c)
it is remitted to the United Kingdom in the temporary period
of non-residence, and
45
(d)
ignoring this section—

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
562

(i)
no charge to tax arises by virtue of section 554Z9(2) or
554Z10(2) in respect of it, but
(ii)
such a charge would arise by virtue of one of those
sections if the existence of any double taxation relief
arrangements were disregarded.
5
(4)
Subsection (3)(d)(i) includes a case where the charge could be
prevented by making a DTR claim, even if no claim is in fact made.
(5)
Nothing in any double taxation relief arrangements is to be read as
preventing A from being chargeable to income tax in respect of any
income treated by virtue of this section as remitted to the United
10
Kingdom in the period of return (or as preventing a charge to that tax
from arising as a result).
(6)
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-
avoidance) explains—
(a)
when an individual is to be regarded as “temporarily non-
15
resident”, and
(b)
what “the temporary period of non-residence” and “the
period of return” mean.
(7)
In this section—
“double taxation relief arrangements” means arrangements that
20
have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part
6;
“relevant scheme” means an employer-financed retirement
25
benefits scheme (within the meaning of that Chapter) or a
superannuation fund to which section 615(3) of ICTA applies;
“remitted to the United Kingdom” has the same meaning as in
Chapter A1 of Part 14 of ITA 2007.”
128
In that Chapter, in section 554Z12 (relevant step taken after A’s death etc),
30
after subsection (8) insert—
“(9)
Section 554Z4A and section 554Z11A apply for the purposes of
subsection (4) as for the purposes of section 554Z2 and section
554Z9(2) or 554Z10(2) respectively (reading references in sections
554Z4A and 554Z11A to “A” as references to “the relevant person”).
35
(10)
But those sections do not apply for the purposes of subsection (4) if
the relevant person’s temporary period of non-residence began
before A died.”
129
In Chapter 3 of Part 9 (United Kingdom pensions: general rules), after
section 572 insert—
40
“572A
Temporary non-residents
(1)
This section applies if an individual is temporarily non-resident.
(2)
Any pension within subsection (3) is to be treated for the purposes of
section 571 as if it accrued in the period of return.
(3)
A pension is within this subsection if—
45
(a)
section 569 applies to it,

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
563

(b)
it is in the form of a lump sum,
(c)
it accrued in the temporary period of non-residence, and
(d)
ignoring this section—
(i)
it is not chargeable to tax under this Chapter, but
(ii)
it would be so chargeable if the existence of any
5
double taxation relief arrangements were
disregarded.
(4)
Subsection (3)(d)(i) includes a case where the charge could be
prevented by making a DTR claim, even if no claim is in fact made.
(5)
Nothing in any double taxation relief arrangements is to be read as
10
preventing the individual from being chargeable to income tax in
respect of any pension treated by virtue of this section as accruing in
the period of return (or as preventing a charge to that tax from
arising as a result).
(6)
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-
15
avoidance) explains—
(a)
when an individual is to be regarded as “temporarily non-
resident”, and
(b)
what “the temporary period of non-residence” and “the
period of return” mean.
20
(7)
In this section—
“double taxation relief arrangements” means arrangements that
have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that
Act.”
25
130   (1)
In Chapter 1 of Part 11 (pay as you earn: introduction), section 683 is
amended as follows.
      (2)
After subsection (3) insert—
“(3ZA)
“PAYE employment income” for a tax year does not include any
taxable specific income treated as paid or received in that tax year by
30
section 394A or 554Z4A (temporary non-residents).”
      (3)
For subsection (3B) substitute—
“(3B)
“PAYE pension income” for a tax year does not include any taxable
pension income that is treated as accruing in that tax year by section
572A or 579CA (temporary non-residents).”
35
New special rule: distributions to participators in close companies etc
131
Part 4 of ITTOIA 2005 (savings and investment income) is amended as
follows.
132
In Chapter 1 (introduction), after section 368 insert—
“368A
Interpretation of special rules for temporary non-residents
40
(1)
This section concerns provisions of this Part that are expressed to
apply if an individual is “temporarily non-resident” (“TNR
provisions”).

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
564

(2)
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-
avoidance) explains for the purposes of TNR provisions—
(a)
when an individual is to be regarded as “temporarily non-
resident”, and
(b)
what the following terms mean—
5
(i)
“the temporary period of non-residence”,
(ii)
“the year of departure”, and
(iii)
“the period of return”.
(3)
A reference in TNR provisions to “the year of return” is to the tax
year consisting of or including the period of return.
10
(4)
Nothing in any double taxation relief arrangements is to be read as
preventing the individual from being chargeable to income tax by
virtue of any TNR provisions (or as preventing a charge to that tax
from arising as a result).
(5)
In this section and in TNR provisions, “double taxation relief
15
arrangements” means arrangements that have effect under section
2(1) of TIOPA 2010.”
133
In Chapter 3 (dividends etc from UK resident companies and tax credits etc
in respect of certain distributions), after section 401B insert—
“Anti-avoidance
20
401C
Temporary non-residents
(1)
This section applies if—
(a)
an individual is temporarily non-resident,
(b)
a relevant distribution is made or treated as made to the
individual in the temporary period of non-residence,
25
(c)
the tax year in which it is made or treated as made (“the
distribution year”) is a tax year for which the individual is UK
resident, and
(d)
the amount of income tax charged on the distribution under
this Chapter is less than it would have been if the existence of
30
double taxation relief arrangements were disregarded.
(2)
Subsections (3) and (4) have effect in cases where the distribution
year is not the year of return.
(3)
The total income (see Step 1 of the calculation in section 23 of ITA
2007) on which the individual is charged to income tax for the year
35
of return is to be increased by an amount equal to the amount on
which tax would be charged under this Chapter in respect of the
distribution disregarding any double taxation relief arrangements.
(4)
But the notional UK tax on that distribution is to be allowed as a
credit against the individual’s liability to income tax for the year of
40
return under Step 6 of the calculation in section 23.
(5)
If the distribution year is the year of return, the tax charged under
this Chapter in respect of the relevant distribution is to be charged
and assessed without regard to the existence of double taxation relief
arrangements.
45

Finance Bill
Schedule 45 — Statutory residence test
Part 4 — Anti-avoidance
565

(6)
For the purposes of this section, a dividend or other distribution is a
“relevant distribution” if—
(a)
it is a dividend or other distribution of a close company, and
(b)
it is made or treated as made to the individual because the
individual was at a relevant time—
5
(i)
a material participator in the company, or
(ii)
an associate of a material participator in the company.
(7)
But a dividend or other distribution within subsection (6) in the form
of a cash dividend is not a “relevant distribution” to the extent that
the dividend is paid in respect of post-departure trade profits.
10
(8)
“Post-departure trade profits” are—
(a)
trade profits of the close company arising in an accounting
period that begins after the start of the temporary period of
non-residence, and
(b)
so much of any trade profits of the close company arising in
15
an accounting period that straddles the start of that
temporary period as is attributable (on a just and reasonable
basis) to a time after the start of that temporary period.
(9)
The extent to which a dividend is paid in respect of post-departure
trade profits is to be determined on a just and reasonable basis.
20
(10)
The “notional UK tax” on the relevant distribution is so much of the
income tax paid by the individual for the distribution year as is
attributable on a just and reasonable basis to the relevant
distribution.
(11)
If section 393 applies, references in this section to a distribution being
25
made to the individual are to a cash dividend being paid over to the
individual.
(12)
In this section—
“associate” and “participator” have the same meanings as in
Part 10 of CTA 2010 (see sections 448 and 454);
30
“material participator” means a participator who has a material
interest in the company, as defined in section 457 of that Act;
“relevant time” means—
(a)
any time in the year of departure or, if the year of
departure is a split year as respects the individual, the
35
UK part of that year, or
(b)
any time in one or more of the 3 tax years preceding
that year;
“trade profits of the close company” means the profits of any
trade carried on by the close company, as calculated in
40
accordance with Part 3 of CTA 2009 (trading income).”
134
In Chapter 4 (dividends from non-UK resident companies), after section 408
insert—
“Anti-avoidance
408A
Temporary non-residents
45
(1)
This section applies if an individual is temporarily non-resident.