Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
573

(b)
the chargeable event giving rise to the gain occurred before
that terminal event,
(c)
the chargeable event giving rise to the gain is one that is
treated as occurring under section 509(1) as a result of the
application of section 498(1)(a),
5
(d)
section 498(1)(a) applies other than by virtue of section 500,
and
(e)
a person (whether or not the individual) is liable for tax under
this Chapter (including by virtue of this section) in respect of
any gain resulting from the terminal event.
10
(9)
Nothing in any double taxation relief arrangements is to be read as
preventing the individual from being liable for tax under this
Chapter in respect of any gain in respect of which the individual is
liable for tax by virtue of subsection (2) (or as preventing a charge to
tax on that gain from arising under this Chapter).
15
(10)
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
20
period of return” mean.
(11)
In this section—
“terminal event” means an event mentioned in section 499(3);
“year of return” means the tax year that consists of or includes the
period of return.”
25
141
In section 468 (non-UK resident trustees and foreign institutions), after
subsection (6) insert—
“(7)
This section does not apply if someone is liable under section 465B in
respect of the gain.”
142
In section 514 (chargeable events where transaction-related calculations
30
show gains), after subsection (4) insert—
“(4A)
Subsection (3)(b) includes a case where a person would be liable to
tax on the gain under section 465B for the tax year in which the
transaction occurs (because the transaction occurs in the year of
return, as defined in that section).”
35
143
In section 541 (calculation of deficiencies), in subsection (4)(b), after “that
section” insert “or formed part of the total income of that individual by
virtue of section 465B for the tax year mentioned in section 539(1)”.
144
In section 552 of ICTA (information: duties of insurers), in subsection (13),
for “section 541A” substitute “section 465B or 541A”.
40
Part 5
Miscellaneous
Interpretation
145
In this Schedule—

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
574

“corporation tax” includes any amount assessable or chargeable as if it
were corporation tax;
“country” includes a state or territory;
“cross-border trip” is defined in paragraph 30;
“double taxation arrangements” means arrangements that have effect
5
under section 2(1) of TIOPA 2010;
“employment”—
(a)
has the meaning given in section 4 of ITEPA 2003, and
(b)
includes an office within the meaning of section 5(3) of that
Act;
10
“enactment” means an enactment whenever passed (including this Act)
and includes—
(a)
an Act of the Scottish Parliament,
(b)
a Measure or Act of the National Assembly for Wales,
(c)
any Northern Ireland legislation as defined by section 24(5)
15
of the Interpretation Act 1978, and
(d)
any Orders in Council, orders, rules, regulations, schemes
warrants, byelaws and other instruments made under an
enactment (including anything mentioned in paragraphs (a)
to (c) of this definition);
20
“home” is to be construed in accordance with paragraph 25;
“individual” means an individual acting in any capacity (including as
trustee or personal representative);
“overseas” means anywhere outside the UK;
“parenting leave” means maternity leave, paternity leave, adoption
25
leave or parental leave (whether statutory or otherwise);
“relevant job on board a vehicle, aircraft or ship” is defined in
paragraph 30;
“ship” includes any kind of vessel (including a hovercraft);
“significant break from overseas work” is defined in paragraph 29;
30
“significant break from UK work” is defined in paragraph 29;
“split year”, as respects an individual, means a tax year that is, as
respects that individual, a split year within the meaning of Part 3 of
this Schedule;
“trade” also includes—
35
(a)
a profession or vocation,
(b)
anything that is treated as a trade for income tax purposes,
and
(c)
the commercial occupation of woodlands (within the
meaning of section 11(2) of ITTOIA 2005);
40
“work” is defined in paragraph 26;
“UK” means the United Kingdom, including the territorial sea of the
United Kingdom;
“UK tie” is defined in paragraph 31;
“whole month” means the whole of January, the whole of February and
45
so on, except that the period from the start of a tax year to the end of
April is to count as a whole month.
146
In relation to an individual who carries on a trade—

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
575

(a)
a reference in this Schedule to annual leave or parenting leave is to
reasonable amounts of time off from work for the same purposes as
the purposes for which annual leave or parenting leave is taken, and
(b)
what are “reasonable amounts” is to be assessed having regard to the
annual leave or parenting leave to which an employee might
5
reasonably expect to be entitled if doing similar work.
147
A reference in this Schedule to a number of days being less than a specified
number includes a case where the number of days is zero.
Consequential amendments
148   (1)
TCGA 1992 is amended as follows.
10
      (2)
Omit section 9.
      (3)
In section 288 (interpretation)—
(a)
in subsection (1), insert the following definition at the appropriate
place—
““resident” means resident in accordance with the
15
statutory residence test in Part 1 of Schedule 45 to the
Finance Act 2013;”, and
(b)
in the Table in subsection (8), omit the entry for the expressions
“resident” and “ordinarily resident”.
149
In section 27 of ITEPA 2003 (UK-based earnings for year when employee not
20
UK resident), in subsection (1), for “in which” substitute “for which”.
150
In section 465 of ITTOIA 2005 (gains from contracts for life insurance etc:
liability of individuals), in subsection (1), for “in the tax year” substitute “for
the tax year”.
151   (1)
Chapter 4 of Part 2 of FA 2005 (trusts with vulnerable beneficiary) is
25
amended as follows.
      (2)
In section 28 (vulnerable person’s liability: VQTI), for subsection (4)
substitute—
“(4)
Where the vulnerable person is non-UK resident for the tax year, his
or her income tax liability for the purposes of determining TLV1 and
30
TLV2 is to be computed in accordance with the Income Tax Acts on
the assumption that—
(a)
he or she is UK resident for the tax year,
(b)
that year is not, as respects him or her, a split year within the
meaning of Part 3 of Schedule 45 to FA 2013, and
35
(c)
he or she is domiciled in the United Kingdom throughout
that year.”
      (3)
In section 30 (qualifying trusts gains: special capital gains tax treatment)—
(a)
in subsection (2)(a) and (b), for “during” substitute “for”, and
(b)
omit subsection (5).
40
      (4)
In section 31 (UK resident vulnerable persons: amount of relief), in
subsection (1), for “during” substitute “for”.
      (5)
In section 32 (non-UK resident vulnerable persons: amount of relief), in
subsection (1), for “during” substitute “for”.

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
576

      (6)
In section 41—
(a)
in subsection (1), insert the following definitions in the appropriate
places—
““non-UK resident” means not resident in the United
Kingdom in accordance with the statutory residence
5
test in Part 1 of Schedule 45 to FA 2013,”, and
““UK resident” means resident in the United Kingdom
in accordance with the statutory residence test in Part
1 of Schedule 45 to FA 2013.”, and
(b)
omit subsection (2).
10
152   (1)
ITA 2007 is amended as follows.
      (2)
In section 809B (claim for remittance basis to apply), in subsection (1)(a), for
“in that year” substitute “for that year”.
      (3)
In section 809D (application of remittance basis without claim where
unremitted foreign income and gains under £2,000), in subsection (1)(a), for
15
“in that year” substitute “for that year”.
      (4)
In section 809E (application of remittance basis without claim: other cases),
in subsection (1)(a), for “in that year” substitute “for that year”.
      (5)
In section 810 (limits on liability to income tax of non-UK residents:
overview of Chapter), after subsection (3) insert—
20
“(4)
In relation to an individual—
(a)
a reference in this Chapter to a non-UK resident’s liability to
income tax is a reference to the liability of someone who is
non-UK resident for the tax year for which the liability arises,
and
25
(b)
accordingly, enactments under which income arising to a UK
resident in the overseas part of a split year is treated as
arising to a non-UK resident are of no relevance to this
Chapter.”
      (6)
Omit sections 829 to 832.
30
Commencement
153   (1)
Parts 1 and 2 of this Schedule have effect for determining whether
individuals are resident or not resident in the UK for the tax year 2013-14 or
any subsequent tax year.
      (2)
Part 3 of this Schedule has effect in calculating an individual’s liability to
35
income tax or capital gains tax for the tax year 2013-14 or any subsequent tax
year.
      (3)
Part 4 of this Schedule has effect if the year of departure (as defined in that
Part) is the tax year 2013-14 or a subsequent tax year.
Transitional and saving provision
40
154   (1)
This paragraph applies if—
(a)
year X or, in Part 3 of this Schedule, the relevant year is the tax year
2013-14, 2014-15, 2015-16, 2016-17 or 2017-18, and

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
577

(b)
it is necessary to determine under this Schedule whether an
individual was resident or not resident in the UK for a tax year before
the tax year 2013-14 (a “pre-commencement tax year”).
      (2)
The question under this Schedule is to be determined in accordance with the
rules in force for determining an individual’s residence for that pre-
5
commencement tax year (and not in accordance with the statutory residence
test).
      (3)
But an individual may by notice in writing to Her Majesty’s Revenue and
Customs elect, as respects one or more pre-commencement tax years, for the
question under this Schedule to be determined instead in accordance with
10
the statutory residence test.
      (4)
A notice under sub-paragraph (3)—
(a)
must be given no later than the first anniversary of the end of year X
or, in a Part 3 case, the relevant year, and
(b)
is irrevocable.
15
      (5)
Unless, in relation to a pre-commencement tax year, an election is made
under sub-paragraph (3) as respects that year—
(a)
paragraph 10(b) of this Schedule has effect in relation to that year as
if the words “by virtue of meeting the automatic residence test” were
omitted,
20
(b)
paragraph 16 of this Schedule has effect in relation to that year as if—
(i)
in sub-paragraph (1)(b), the words “because P met the third
automatic overseas test for each of those years” were omitted,
and
(ii)
in sub-paragraph (2)(a), the words “because P met the third
25
automatic overseas test for that year” were omitted, and
(c)
paragraph 49 of this Schedule has effect in relation to that year as if
in sub-paragraph (2)(a) for the words from “because” to the end there
were substituted “in circumstances where the taxpayer was working
overseas full-time for the whole of that year.”
30
155   (1)
This paragraph applies if—
(a)
year X or, for Part 3 of this Schedule, the tax year for which an
individual’s liability to tax is being calculated is the tax year 2013-14
or a subsequent tax year, and
(b)
it is necessary to determine under a provision of this Schedule, or a
35
provision inserted by Part 3 of this Schedule, whether a tax year
before the tax year 2013-14 (a “pre-commencement tax year”) was a
split year as respects the individual.
      (2)
The provision is to have effect as if—
(a)
the reference to a split year were to a tax year to which the relevant
40
ESC applied, and
(b)
any reference to the UK part or the overseas part of such a year were
to the part corresponding as far as possible, in accordance with the
terms of the relevant ESC, to the UK part or the overseas part of a
split year.
45
      (3)
Where the provision also refers to cases involving actual or deemed
departure from the UK, the reference is to be read and given effect so far as
possible in accordance with the terms of the relevant ESC.

Finance Bill
Schedule 45 — Statutory residence test
Part 5 — Miscellaneous
578

      (4)
“The relevant ESC” means whichever of the extra-statutory concessions to
which effect is given by Part 3 of this Schedule is relevant in the individual’s
case.
156   (1)
Sub-paragraph (2) applies in determining whether the test in paragraph
50(3) is met where the relevant year is the tax year 2013-14.
5
      (2)
The circumstances of a partner of the taxpayer are to be treated as falling
within Case 6 for the previous tax year if the partner was eligible for split
year treatment in relation to that tax year under the relevant ESC on the
grounds that he or she returned to the United Kingdom after a period
working overseas full-time.
10
      (3)
Where the circumstances of a partner are treated as falling within Case 6
under sub-paragraph (2), the reference in paragraph 50(7)(b) to the UK part
of the relevant year as defined for Case 6 is a reference to the part
corresponding, so far as possible, in accordance with the terms of the
relevant ESC, to the UK part of that year.
15
      (4)
“The relevant ESC” means whichever of the extra-statutory concessions to
which effect is given by Part 3 of this Schedule is relevant in the partner’s
case.
157   (1)
This paragraph applies in determining whether the test in paragraph
110(1)(c) is met in relation to a tax year before the tax year 2013-14 (a “pre-
20
commencement tax year”).
      (2)
Paragraph 110(1) is to have effect as if for paragraph (c) there were
substituted—
“(c)
at least 4 out of the 7 tax years immediately preceding the
year of departure was a tax year meeting the following
25
conditions—
(i)
the individual was resident in the UK for that year,
and
(ii)
there was no time in that year when the individual
was Treaty non-resident (see paragraph 112(3)).”
30
      (3)
Whether an individual was resident in the UK for a pre-commencement tax
year is to be determined in accordance with the rules in force for
determining an individual’s residence for that pre-commencement tax year
(and not in accordance with the statutory residence test).
158   (1)
The existing temporary non-resident provisions, as in force immediately
35
before the day on which this Act is passed, continue to have effect on and
after that day in any case where the year of departure (as defined in Part 4 of
this Schedule) is a tax year before the tax year 2013-14.
      (2)
Where those provisions continue to have effect by virtue of sub-paragraph
(1)—
40
(a)
the question of whether a person is or is not resident in the UK for
the tax year 2013-14 or a subsequent tax year is to be determined for
the purposes of those provisions in accordance with Part 1 of this
Schedule, but
(b)
the effect of Part 3 is to be ignored.
45
      (3)
The existing temporary non-resident provisions are—
(a)
section 10A of TCGA 1992 (chargeable gains),

Finance Bill
Schedule 46 — Ordinary residence
Part 1 — Income tax and capital gains tax: remittance basis of taxation
579

(b)
section 576A of ITEPA 2003 (income withdrawals under certain
foreign pensions),
(c)
section 579CA of that Act (income withdrawals under registered
pension schemes), and
(d)
section 832A of ITTOIA (relevant foreign income charged on
5
remittance basis).
159
Section 13 of FA 2012 (Champions League final 2013) is to be read and given
effect, on and after the day on which this Act is passed, as if section 218 and
this Schedule had not been enacted.
Schedule 46
10
Section 219

Ordinary residence
Part 1
Income tax and capital gains tax: remittance basis of taxation
Remittance basis restricted to non-doms
1
Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.
15
2
In section 809A (overview of Chapter), omit “or are not ordinarily UK
resident”.
3
In section 809B (claim for remittance basis to apply)—
(a)
in subsection (1)(b), omit “or is not ordinarily UK resident in that
year”, and
20
(b)
omit subsection (2).
4
In section 809D (application of remittance basis without claim where
unremitted foreign income and gains under £2,000)—
(a)
in subsection (1)(b), omit “or is not ordinarily UK resident in that
year”, and
25
(b)
in subsection (1A), omit “the individual is not domiciled in the
United Kingdom in that year and”.
5
In section 809E (application of remittance basis without claim: other cases),
in subsection (1)(b), omit “or is not ordinarily UK resident in that year”.
Treatment of relevant foreign earnings
30
6
ITEPA 2003 is amended as follows.
7     (1)
In section 22 (chargeable overseas earnings for year when remittance basis
applies and employee ordinarily UK resident), in subsection (1), for
paragraph (b) substitute—
“(b)
the employee does not meet the requirement of section 26A
35
for that year.”
      (2)
Accordingly—
(a)
in the heading of that section, for “ordinarily UK resident”
substitute “outside section 26”, and