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House of Lords

Session 2013 - 14 Internet Publications Other Bills before Parliament

Finance Bill

Finance Bill Schedule 46 — Ordinary residence Part 1 — Income tax and capital gains tax: remittance basis of taxation 580
(b)    in the italicised heading before that section, for “UK ordinarily resident
employees” substitute “employees outside section 26”.
8           In section 23 (calculation of “chargeable overseas earnings”), in subsection
(2), for paragraph (aa) substitute—
“(aa)    the employee does not meet the requirement of section 26A	5
for that year,”.
9     (1)   In section 26 (foreign earnings for year when remittance basis applies and
employee not ordinarily UK resident), in subsection (1), for “is not ordinarily
UK resident in” substitute “meets the requirement of section 26A for”.
(2)   Accordingly—	10
(a)    in the heading of that section, for “not ordinarily UK resident”
substitute “meets section 26A requirement”, and
(b)    in the italicised heading before that section, for “not UK ordinarily
resident” substitute “who meet section 26A requirement”.
10          After that section insert—	15
“26A     Section 26: requirement for 3-year period of non-residence
(1)    An employee meets the requirement of this section for a tax year if
the employee was—
(a)    non-UK resident for the previous 3 tax years, or
(b)    UK resident for the previous tax year but non-UK resident for	20
the 3 tax years before that, or
(c)    UK resident for the previous 2 tax years but non-UK resident
for the 3 tax years before that, or
(d)    non-UK resident for the previous tax year, UK resident for
the tax year before that and non-UK resident for the 3 tax	25
years before that.
(2)    The residence status of the employee before the 3 years of non-UK
residence is not relevant for these purposes.”
11    (1)   Section 41C (foreign securities income) is amended as follows.
(2)   In subsection (4), for paragraph (b) substitute—	30
“(b)    the individual does not meet the requirement of section 26A
for the year (reading references there to the employee as
references to the individual),”.
(3)   In subsection (6), for paragraph (b) substitute—
“(b)    the individual meets the requirement of section 26A for the	35
year (reading references there to the employee as references
to the individual), and”.
12          In section 271 (limited exemption of removal benefits and expenses:
general), in subsection (2)—
(a)    in paragraph (a), for “ordinarily UK resident” substitute “outside	40
section 26”, and
(b)    in paragraph (b), for “not ordinarily UK resident” substitute “meets
section 26A requirement”.
13    (1)   In section 554Z9 (remittance basis: A is ordinarily UK resident), in
Finance Bill Schedule 46 — Ordinary residence Part 1 — Income tax and capital gains tax: remittance basis of taxation 581
subsection (1), for paragraph (c) substitute—
“(c)    A does not meet the requirement of section 26A for the
relevant tax year (reading references there to the employee as
references to A),”.
(2)   Accordingly, in the heading of that section, for “A is ordinarily UK	5
resident” substitute “A does not meet section 26A requirement”.
14    (1)   In section 554Z10 (remittance basis: A is not ordinarily resident), in
subsection (1), for paragraph (c) substitute—
“(c)    A meets the requirement of section 26A for the relevant tax
year (reading references there to the employee as references	10
to A).”
(2)   Accordingly, in the heading of that section, for “A is not ordinarily
resident” substitute “A meets section 26A requirement”.
15    (1)   Section 690 (employee non-resident etc) is amended as follows.
(2)   In subsection (1), for paragraph (a) substitute—	15
“(a)    is either non-UK resident for the tax year or is UK resident
but meets the requirement of section 26A for the tax year,
and”.
(3)   In subsection (2A), for “but not ordinarily resident in a tax year” substitute
“for a tax year but not domiciled in the United Kingdom in that tax year”.	20
Consequential amendments
16          In section 266A of ICTA (life assurance premiums paid by employer), in
subsection (8)—
(a)    in paragraph (a), for “employee resident and ordinarily resident, but
not domiciled, in UK” substitute “remittance basis applies and	25
employee outside section 26”, and
(b)    in paragraph (b), for “employee resident, but not ordinarily resident,
in UK” substitute “remittance basis applies and employee meets
section 26A requirement”.
17          In section 12 of TCGA 1992 (non-UK domiciled individuals to whom	30
remittance basis applies), for subsection (1) substitute—
“(1)    This section applies to foreign chargeable gains accruing to an
individual in a tax year (“the foreign chargeable gains”) if section
809B, 809D or 809E of ITA 2007 (remittance basis) applies to the
individual for that year.”	35
18          In section 87B of that Act (section 87: remittance basis), in subsection (1)—
(a)    insert “and” at the end of paragraph (a),
(b)    omit “and” at the end of paragraph (b), and
(c)    omit paragraph (c).
19          In section 726 of ITA 2007 (non-UK domiciled individuals to whom	40
remittance basis applies), for subsection (1) substitute—
“(1)    This section applies in relation to income treated under section 721 as
arising to an individual in a tax year (“the deemed income”) if section
Finance Bill Schedule 46 — Ordinary residence Part 1 — Income tax and capital gains tax: remittance basis of taxation 582
809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
20          In section 730 of that Act (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—
“(1)    This section applies in relation to income treated under section 728 as	5
arising to an individual in a tax year (“the deemed income”) if section
809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
21          In section 735 of that Act (non-UK domiciled individuals to whom
remittance basis applies), for subsection (1) substitute—	10
“(1)    This section applies in relation to income treated under section 732 as
arising to an individual in a tax year (“the deemed income”) if section
809B, 809D or 809E (remittance basis) applies to the individual for
that year.”
22          In section 809F of that Act (effect on what is chargeable), in subsection (4),	15
for “If the individual is not domiciled in the United Kingdom in that year,
the” substitute “The”.
23          In section 809YD of that Act (chargeable gains accruing on sales of exempt
property), in subsection (3), omit “and P is not domiciled in the United
Kingdom in that year”.	20
24          In section 809Z7 of that Act (meaning of “foreign income and gains” etc)—
(a)    in subsection (2)(d), omit “if the individual is not domiciled in the
United Kingdom in that year,”, and
(b)    in subsection (3)(a), for “is ordinarily UK resident in” substitute
“does not meet the requirement of section 26A of ITEPA 2003 for”.	25
Commencement
25          The amendments made by this Part of this Schedule have effect in relation
to an individual’s foreign income and gains for the tax year 2013-14 or any
subsequent tax year.
Savings	30
26    (1)   This paragraph applies to an individual who—
(a)    was resident in the United Kingdom for the tax year 2012-13, but
(b)    was not ordinarily resident there at the end of the tax year 2012-13.
(2)   Enactments relating to income tax or capital gains tax have effect, in relation
to any eligible foreign income and gains of the individual, as if the	35
amendments made by this Part of this Schedule had not been made.
(3)   “Eligible foreign income and gains” means—
(a)    if the individual was resident in the United Kingdom for the tax year
2010-11 and the tax year 2011-12, foreign income and gains for the tax
year 2013-14,	40
(b)    if the individual was not resident in the United Kingdom for the tax
year 2010-11 but was resident in the United Kingdom for the tax year
2011-12, foreign income and gains for the tax year 2013-14 and the tax
year 2014-15, and
Finance Bill Schedule 46 — Ordinary residence Part 2 — Income tax: arising basis of taxation 583
(c)    if the individual was not resident in the United Kingdom for the tax
year 2011-12, foreign income and gains for the tax year 2013-14, the
tax year 2014-15 and the tax year 2015-16.
(4)   Where, by virtue of this paragraph, it is necessary to determine whether an
individual is (or is not) ordinarily resident in the United Kingdom at a time	5
on or after 6 April 2013, the question is to be determined as it would have
been in the absence of this Schedule.
Interpretation
27          References in this Part of this Schedule to an individual’s “foreign income
and gains” for a tax year are to be read in accordance with section 809Z7 of	10
ITA 2007 (interpretation of remittance basis rules).
Part 2
Income tax: arising basis of taxation
ICTA
28          In section 614 of ICTA (exemptions and reliefs in respect of income from	15
investments etc of certain pension schemes)—
(a)    in subsection (4), for “not domiciled, ordinarily resident or resident”
substitute “not domiciled and not resident”, and
(b)    in subsection (5), for “not domiciled, ordinarily resident or resident”
substitute “not domiciled and not resident”.	20
ITEPA 2003
29          ITEPA 2003 is amended as follows.
30          In section 56 (application of Income Tax Acts in relation to deemed
employment), in subsection (5)—
(a)    for paragraph (a) substitute—	25
“(a)    the worker being resident or domiciled outside the
United Kingdom or meeting the requirement of
section 26A,”, and
(b)    in paragraph (b), omit “or ordinarily resident”.
31          In section 61G (application of Income Tax Acts in relation to deemed	30
employment), in subsection (5)—
(a)    for paragraph (a) substitute—
“(a)    the worker being resident or domiciled outside the
United Kingdom or meeting the requirement of
section 26A,”, and	35
(b)    in paragraph (b), omit “or ordinarily resident”.
32          In section 328 (the income from which deductions may be made), in
subsection (5), omit the entry for Chapter 6 of Part 5 and the word “and”
immediately preceding it.
33          In section 341 (travel at start or finish of overseas employment), in	40
subsection (3), for “resident and ordinarily resident in the United Kingdom”
substitute “UK resident”.
Finance Bill Schedule 46 — Ordinary residence Part 2 — Income tax: arising basis of taxation 584
34          In section 342 (travel between employments where duties performed
abroad), in subsection (6), for “resident and ordinarily resident in the United
Kingdom” substitute “UK resident”.
35          In section 370 (travel costs where duties performed abroad: employee’s
travel), in subsection (6), omit “in which the employee is ordinarily UK	5
resident”.
36          In section 376 (foreign accommodation and subsistence costs and expenses
(overseas employments)), in subsection (1)(b), for “resident and ordinarily
resident in the United Kingdom” substitute “UK resident”.
37    (1)   Section 378 (deductions from seafarers’ earnings: eligibility) is amended as	10
follows.
(2)   In subsection (1), for “relevant taxable earnings or EEA-resident earnings”
substitute “relevant general earnings”.
(3)   For subsection (5) substitute—
“(5)    “Relevant general earnings” means—	15
(a)    taxable earnings under section 15, 22 or 26, or
(b)    general earnings—
(i)    to which section 27 applies, and
(ii)    which are for a period in which the employee is liable
under the law of an EEA State (other than the United	20
Kingdom) to tax in that State by reason of domicile or
residence.”
(4)   Omit subsection (6).
38    (1)   Section 413 (exception in certain cases of foreign service) is amended as
follows.	25
(2)   In subsection (2), after “subsection” (in the second place it occurs) insert
“(2A),”.
(3)   After that subsection insert—
“(2A)    This subsection applies to service in or after the tax year 2013-14—
(a)    to the extent that it consists of duties performed outside the	30
United Kingdom in respect of which earnings would not be
relevant earnings, or
(b)    if a deduction equal to the whole amount of the earnings
from the employment was or would have been allowable
under Chapter 6 of Part 5 (deductions from seafarers’	35
earnings).”
(4)   In subsection (3), after “2003-04” insert “but before the tax year 2013-14”.
(5)   After that subsection insert—
“(3ZA)    In subsection (2A)(a) “relevant earnings” means earnings for a tax
year that are earnings to which section 15 applies and to which that	40
section would apply even if the employee made a claim under
section 809B of ITA 2007 (claim for remittance basis) for that year.”
39    (1)   In section 681A (foreign benefits of consular employees), for subsection (4)
Finance Bill Schedule 46 — Ordinary residence Part 2 — Income tax: arising basis of taxation 585
substitute—
“(4)    Condition C is that—
(a)    the officer or employee is a permanent employee of that state,
or
(b)    the officer or employee was non-UK resident for each of the	5
2 tax years preceding the tax year in which the officer or
employee became a consular officer or employee in the
United Kingdom of that state.”
(2)   The amendment made by this paragraph does not apply to a person who
became a consular officer or employee in the United Kingdom before 6 April	10
2013.
40    (1)   In Schedule 2 (approved share incentive plans), in paragraph 8(2), omit
paragraph (b) and the “and” immediately before it.
(2)   The amendments made by this paragraph do not apply to plans that have
been approved before the day on which this Act is passed.	15
41    (1)   In Schedule 3 (approved SAYE option schemes), in paragraph 6(2)—
(a)    insert “and” at the end of paragraph (c), and
(b)    omit paragraph (ca), including the “and” at the end of it.
(2)   The amendments made by this paragraph do not apply to schemes that have
been approved before the day on which this Act is passed.	20
42          In Schedule 5 (enterprise management incentives), in paragraph 27(3)(b),
omit “and ordinarily resident”.
ITTOIA 2005
43          ITTOIA 2005 is amended as follows.
44          In section 154A (certain non-UK residents with interest on 3½% War Loan	25
1952 Or After), in subsection (1)(a), omit “ordinarily”.
45          In section 459 (transfer of assets abroad), in subsection (2), for “an individual
ordinarily UK resident” substitute “a UK resident individual”.
46          In section 468 (non-UK resident trustees and foreign institutions), for
subsection (2) substitute—	30
“(2)    Chapter 2 of Part 13 of ITA 2007 (which prevents avoidance of tax
where a UK resident individual benefits from a transfer of assets)
applies with the modifications specified in subsection (3) or (4).”
47          In section 569 (anti-avoidance: transfer of assets abroad), in subsection (2),
for “an individual ordinarily UK resident” substitute “a UK resident	35
individual”.
48    (1)   In section 636 (calculation of undistributed income), in subsection (2)(b), for
“, resident and ordinarily resident” substitute “and resident”.
(2)   The amendment made by this paragraph does not apply in calculating
income arising under a settlement in tax years ending before 6 April 2013.	40
49          In section 648 (income arising under a settlement), in subsection (1)(b), for “,
resident and ordinarily resident” substitute “and resident”.
Finance Bill Schedule 46 — Ordinary residence Part 2 — Income tax: arising basis of taxation 586
50          In section 651 (meaning of “UK estate” and “foreign estate”), in subsection
(3), omit “or not ordinarily UK resident”.
51          In section 664 (the aggregate income of the estate), in subsection (2)(b)(i),
omit “who was ordinarily UK resident”.
52    (1)   Section 715 (interest from FOTRA securities held on trust) is amended as	5
follows.
(2)   In subsection (1)(b), for “person not ordinarily UK resident” substitute “non-
UK resident person”.
(3)   In subsection (2)—
(a)    for “person not ordinarily UK resident” substitute “non-UK resident	10
person”, and
(b)    for “is ordinarily UK resident at the time when” substitute “is UK
resident for the tax year in which”.
(4)   In relation to a FOTRA security issued before 6 April 2013, the amendments
made by this paragraph apply only if the security was acquired by the trust	15
on or after that date.
53    (1)   In section 771 (relevant foreign income of consular officers and employees),
for subsection (4) substitute—
“(4)    Condition C is that—
(a)    the officer or employee is a permanent employee of that state,	20
or
(b)    the officer or employee was non-UK resident for each of the
2 tax years preceding the tax year in which the officer or
employee became a consular officer or employee in the
United Kingdom of that state.”	25
(2)   The amendment made by this paragraph does not apply to a person who
became a consular officer or employee in the United Kingdom before 6 April
2013.
ITA 2007
54          ITA 2007 is amended as follows.	30
55          In section 465 (overview of Chapter 2 and interpretation), in subsection (4),
omit “and ordinary residence”.
56    (1)   Section 475 (residence of trustees) is amended as follows.
(2)   For subsection (1) substitute—
“(1)    This section applies for income tax purposes and explains how to	35
work out, in relation to the trustees of a settlement, whether or not
the single person mentioned in section 474(1) is UK resident.”
(3)   In subsection (2), for “both UK resident and ordinarily UK resident”
substitute “UK resident”.
(4)   In subsection (3), for “both non-UK resident and not ordinarily UK resident”	40
substitute “non-UK resident”.