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Finance Bill


Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 7 — Savings income: double taxation arising from withholding tax

87

 

101     

Transitional provision

(1)   

This section has effect only in relation to—

(a)   

payments of interest made on or after 1st January 2004 but before the

coming into force of the first regulations under section 95, and

(b)   

payments of royalties made on or after 1st January 2004 but before the

5

passing of this Act.

(2)   

Anything done by a person—

(a)   

before 8th April 2004, and

(b)   

in reliance on, and in accordance with, a provision of the published

draft Chapter or the published draft regulations,

10

   

is to be treated as if it had been done under, and in accordance with, the

corresponding provision of this Chapter or of regulations under section 95.

(3)   

Anything done by a person—

(a)   

on or after 8th April 2004 but before the passing of this Act, and

(b)   

in reliance on, and in accordance with, a provision of the published

15

Chapter or the published regulations,

   

is to be treated as if it had been done under, and in accordance with, the

corresponding provision of this Chapter or of regulations under section 95.

(4)   

During the period between the passing of this Act and the coming into force of

the first regulations under section 95, the published regulations shall have

20

effect as if they were regulations under that section.

(5)   

In this section—

   

“the published draft Chapter” means the draft version of this Chapter

published by the Board on 10th December 2003;

   

“the published draft regulations” means the draft version of regulations

25

under section 95 published by the Board on 10th December 2003;

   

“the published Chapter” means the version of this Chapter appearing in

the Finance Bill as introduced in the House of Commons and published

on 8th April 2004;

   

“the published regulations” means the draft version of regulations under

30

section 95 published by the Board on 8th April 2004.

Chapter 7

Savings income: double taxation arising from withholding tax

Introductory

102     

Introductory

35

(1)   

This Chapter has effect for the purpose of giving relief from double taxation in

respect of special withholding tax.

(2)   

Such relief is given—

(a)   

by set-off against income tax or capital gains tax;

(b)   

to the extent that it cannot be so set off, by repayment.

40

(3)   

“Special withholding tax” means a withholding tax (however described) levied

under the law of a territory outside the United Kingdom implementing—

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 7 — Savings income: double taxation arising from withholding tax

88

 

(a)   

in the case of a member State, Article 11 of Council Directive 2003/48/

EC of 3rd June 2003 on taxation of savings income in the form of interest

payments (“the Savings Directive”), or

(b)   

in the case of a territory other than a member State, any corresponding

provision of international arrangements (whatever the period for

5

which the provision is to have effect).

(4)   

“International arrangements”, in relation to a territory, means arrangements

made in relation to that territory with a view to ensuring the effective taxation

of savings income under—

(a)   

the law of the United Kingdom, or

10

(b)   

that law and the law of that territory.

(5)   

For the purposes of Part 18 of the Taxes Act 1988 (double taxation relief)—

(a)   

relief from double taxation in respect of special withholding tax is not

to be available under Chapters 1 and 2 of that Part; and

(b)   

special withholding tax is not to be regarded as foreign tax for the

15

purposes of Chapter 2 of that Part.

(6)   

Sections 108 and 109 also make provision for implementing—

(a)   

Article 13(2) of the Savings Directive (provision of certificate to avoid

levy of special withholding tax), and

(b)   

any corresponding provision of international arrangements.

20

(7)   

In this Chapter—

   

“double taxation arrangements” means arrangements having effect by

virtue of section 788 of the Taxes Act 1988 (double taxation relief by

agreement with other territories);

   

“international arrangements” has the meaning given by subsection (4);

25

   

“the Savings Directive” has the meaning given by subsection (3)(a);

   

“savings income”—

(a)   

in the case of special withholding tax levied under the law of a

member State, has the same meaning as the expression “interest

payment” has for the purposes of the Savings Directive (see

30

Articles 6 and 15 of the Directive), and

(b)   

in the case of special withholding tax levied under the law of a

territory other than a member State, has the same meaning as

the corresponding expression has for the purposes of the

international arrangements concerned;

35

   

“special withholding tax” has the meaning given by subsection (3).

(8)   

In the application of this Chapter in relation to capital gains tax, expressions

used in this Chapter and in the Taxation of Chargeable Gains Act 1992 (c. 12)

have the same meaning in this Chapter as in that Act.

Credit etc for special withholding tax

40

103     

Income tax credit etc for special withholding tax

(1)   

This section applies where—

(a)   

a person is chargeable to income tax for a year of assessment in respect

of a payment of savings income or would be so chargeable but for any

exemption or relief which has effect in respect of that payment,

45

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 7 — Savings income: double taxation arising from withholding tax

89

 

(b)   

special withholding tax is levied in respect of the payment, and

(c)   

the person is resident in the United Kingdom for that year of

assessment.

(2)   

On the making of a claim, income tax (“the deemed tax”) of an amount equal

to the amount of the special withholding tax levied is to be treated as having

5

been—

(a)   

paid by or on behalf of the person for that year of assessment, and

(b)   

deducted at source for that year of assessment for the purposes of the

provisions in subsection (3).

(3)   

The provisions are—

10

   

section 7 of the Taxes Management Act 1970 (c. 9) (notice of liability to

income tax and capital gains tax);

   

section 8 of that Act (personal return);

   

section 8A of that Act (trustee’s return);

   

section 9 of that Act (returns to include self-assessment);

15

   

section 59A of that Act (payments on account of income tax);

   

section 59B of that Act (payments of income tax and capital gains tax);

   

section 824(3) of the Taxes Act 1988 (repayment supplements:

determination of relevant time).

(4)   

Where the amount of the deemed tax exceeds the amount (which may be nil)

20

of income tax for which the person is liable for the year of assessment (before

any set-off for the deemed tax), then, to the extent that it would not otherwise

be the case,—

(a)   

the excess is to be set against any capital gains tax for which he is liable

for the year of assessment, and

25

(b)   

he is entitled to a repayment of income tax in respect of any remaining

balance of that excess.

(5)   

But subsection (2) does not apply in relation to an amount of special

withholding tax levied if—

(a)   

the person has obtained relief from double taxation in respect of that

30

special withholding tax under the law of a territory outside the United

Kingdom, and

(b)   

the person was resident in that territory, or was treated as being so

resident under any double taxation arrangements, in the year of

assessment in question.

35

104     

Capital gains tax credit etc for special withholding tax

(1)   

This section applies where—

(a)   

a person makes a disposal of assets in a year of assessment,

(b)   

on the assumption that a chargeable gain were to accrue on the

disposal,—

40

(i)   

it would accrue to the person, and

(ii)   

he would be chargeable to capital gains tax in respect of it,

(c)   

the consideration for the disposal consists of or includes an amount of

savings income,

(d)   

special withholding tax is levied in respect of the whole or any part of

45

the consideration for the disposal, and

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 7 — Savings income: double taxation arising from withholding tax

90

 

(e)   

the person is resident in the United Kingdom for that year of

assessment.

(2)   

For the purposes of subsection (1)(b)(ii), there are to be disregarded—

(a)   

any deductions that fall to be made from the total amount referred to in

section 2(2) of the Taxation of Chargeable Gains Act 1992 (c. 12)

5

(deductions for allowable losses),

(b)   

section 3 of that Act (annual exempt amount), and

(c)   

section 77(1) of that Act (settlor with interest in settlement: trustees not

to be chargeable in certain circumstances).

(3)   

On the making of a claim, capital gains tax (“the deemed tax”) of an amount

10

equal to the amount of the special withholding tax levied is to be treated as

having been paid—

(a)   

by or on behalf of the person for that year of assessment, and

(b)   

for the purposes of section 283(2) of the Taxation of Chargeable Gains

Act 1992 (repayment supplements: determination of relevant time), on

15

31st January next following that year of assessment.

(4)   

For the purposes of the application of the following provisions in relation to the

person for that year of assessment, references in those provisions to income tax

deducted at source for that year of assessment are to be taken to include the

amount of the deemed tax—

20

   

section 7 of the Taxes Management Act 1970 (c. 9) (notice of liability to

income tax and capital gains tax);

   

section 8 of that Act (personal return);

   

section 8A of that Act (trustee’s return);

   

section 9 of that Act (returns to include self-assessment);

25

   

section 59B of that Act (payments of income tax and capital gains tax).

(5)   

Where the amount of the deemed tax exceeds the amount (which may be nil)

of capital gains tax for which the person is liable for the year of assessment

(before any set-off for the deemed tax), then, to the extent that it would not

otherwise be the case,—

30

(a)   

the excess is to be set against any income tax for which he is liable for

the year of assessment, and

(b)   

he is entitled to a repayment of capital gains tax in respect of any

remaining balance of that excess.

(6)   

But subsection (3) does not apply in relation to an amount of special

35

withholding tax levied if—

(a)   

the person has obtained relief from double taxation in respect of that

special withholding tax under the law of a territory outside the United

Kingdom, and

(b)   

he was resident in that territory, or was treated as being so resident

40

under any double taxation arrangements, in the year of assessment in

question.

(7)   

To the extent that section 103 of this Act applies in relation to an amount of

special withholding tax levied (or would so apply on the making of a claim),

this section does not apply in relation to that amount.

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