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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Part 8 — Foreign income: special rules
Chapter 3 — Relevant foreign income charged on arising basis: deductions and reliefs

358

 

Chapter 3

Relevant foreign income charged on arising basis: deductions and reliefs

838     

Expenses attributable to collection or payment of relevant foreign income

(1)   

In calculating the amount of relevant foreign income to be charged to income

tax for a tax year, a deduction is allowed for expenses incurred outside the

5

United Kingdom that are attributable to the collection or payment of the

income.

(2)   

Subsection (1) does not apply to income charged for the tax year in accordance

with section 832 (relevant foreign income charged on the remittance basis).

839     

Annual payments payable out of relevant foreign income

10

(1)   

In calculating the amount of relevant foreign income to be charged to income

tax for a tax year, a deduction is to be allowed for an annual payment other

than interest if it meets conditions A to C.

(2)   

Condition A is that the payment is payable out of the relevant foreign income.

(3)   

Condition B is that, had the payment arisen in the United Kingdom, it would

15

have been chargeable to income tax under one of the following provisions or

to corporation tax under Case III of Schedule D—

Chapter 10 of Part 4 (distributions from unauthorised unit trusts),

section 579 (charge to tax on royalties and other income from intellectual

property),

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Chapter 4 of Part 5 (certain telecommunication rights: non-trading

income), or

Chapter 7 of Part 5 (annual payments not otherwise charged).

(4)   

Condition C is that the payment is made to a non-UK resident.

(5)   

Subsection (1) does not apply if—

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(a)   

the relevant foreign income is received in the United Kingdom, or

(b)   

it is charged for the tax year in accordance with section 832 (relevant

foreign income charged on remittance basis).

(6)   

In the case of relevant foreign income chargeable under Chapter 2 or 17 of Part

2 (trading income) that arises in the Republic of Ireland, this section applies

30

with the omission of condition B and subsection (5)(a).

840     

Relief for backdated pensions charged on the arising basis

(1)   

This section applies if—

(a)   

as a result of section 575(3), 613(4) or 635(4) of ITEPA 2003 a pension or

annuity or an increase in a pension or annuity is treated as relevant

35

foreign income,

(b)   

the pension, annuity or increase is paid in respect of a tax year (“the

earlier year”) before the tax year in which the pension, annuity or

increase arose, and

(c)   

the income is not charged in accordance with section 832 (relevant

40

foreign income charged on the remittance basis).

 
 

Income Tax (Trading and Other Income) Bill
Part 8 — Foreign income: special rules
Chapter 4 — Unremittable income

359

 

(2)   

If the person liable for the income tax makes a claim for relief under this section

for the tax year in which the pension, annuity or increase paid in respect of the

earlier year arises, that pension, annuity or increase is treated as income arising

in the earlier year from a source that the person possessed in the earlier year.

(3)   

But subsection (2) does not affect the calculation of the full amount of the

5

income so arising under section 575(2), 613(3) or 635(3) of ITEPA 2003 (under

which the full amount of that income is to be calculated on the basis that the

pension or annuity is 90% of its actual amount).

(4)   

Section 837 (claims for relief on delayed remittances) applies to claims under

this section as it applies to claims under section 835.

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Chapter 4

Unremittable income

841     

Unremittable income: introduction

(1)   

This Chapter applies if—

(a)   

a person is liable for income tax on income arising in a territory outside

15

the United Kingdom, and

(b)   

the income is unremittable.

(2)   

For the purposes of this Chapter, income is unremittable if conditions A and B

are met.

(3)   

Condition A is that the income cannot be transferred to the United Kingdom

20

by the person who is liable for income tax in respect of the income because of—

(a)   

the laws of the territory where the income arises,

(b)   

executive action of its government, or

(c)   

the impossibility of obtaining there currency that could be transferred

to the United Kingdom.

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(4)   

Condition B is that the person who is liable for income tax in respect of the

income has not realised it outside that territory for an amount in sterling or in

another currency which the person is not prevented from transferring to the

United Kingdom.

(5)   

This Chapter does not apply to profits which a person is treated as receiving

30

under section 714(2) of ICTA (accrued income profits), but see section 723 of

that Act (which makes similar provision).

842     

Claim for relief for unremittable income

(1)   

If a person liable for income tax on unremittable income makes a claim for

relief under this section in respect of that income, it is not taken into account

35

for income tax purposes.

(2)   

Subsection (1) is subject to section 843.

(3)   

No claim under this section may be made in respect of any income so far as an

ECGD payment has been made in relation to it.

 
 

Income Tax (Trading and Other Income) Bill
Part 8 — Foreign income: special rules
Chapter 4 — Unremittable income

360

 

(4)   

In subsection (3) “ECGD payment” means a payment made by the Export

Credit Guarantee Department under an agreement entered into as a result of

arrangements made under—

(a)   

section 2 of the Export and Investment Guarantees Act 1991 (c. 67)

(insurance in connection with overseas investment), or

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(b)   

section 11 of the Export Guarantees and Overseas Investment Act 1978

(c. 18).

(5)   

A claim under this section must be made on or before the first anniversary of

the normal self-assessment filing date for the tax year for which the income

would be charged to tax if no claim were made.

10

843     

Withdrawal of relief

(1)   

This section applies if—

(a)   

a claim under section 842 has been made in relation to any income, and

(b)   

either—

(i)   

the income ceases to be unremittable, or

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(ii)   

an ECGD payment is made in relation to it.

(2)   

In this section “ECGD payment” has the meaning given by section 842(4).

(3)   

If income ceases to be unremittable, the income is treated as arising on the date

on which it ceases to be unremittable.

(4)   

If an ECGD payment is made in relation to income, the income is treated, to the

20

extent of the payment, as arising on the date on which the ECGD payment is

made.

(5)   

The income treated as arising under subsection (3) or (4), and any tax payable

in respect of it under the law of the territory where it arises, are taken into

account for income tax purposes at their value at the date on which the income

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is treated as arising.

(6)   

Subsections (3) to (5) do not apply so far as the income has already been treated

as arising as a result of this section.

(7)   

If a person who would have become liable for income tax as a result of this

section has died—

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(a)   

the personal representatives are liable for the tax instead, and

(b)   

the tax is a debt due from and payable out of the estate.

844     

Income charged on withdrawal of relief after source ceases

(1)   

This section applies if—

(a)   

income is treated as arising as a result of section 843, and

35

(b)   

at the time it is so treated the person who would have become liable for

income tax as a result of that section—

(i)   

has permanently ceased to carry on the trade, profession,

vocation or property business from which the income arises, or

(ii)   

in the case of income from another source, has ceased to possess

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that source.

(2)   

In the case of income from a trade, profession or vocation—

 
 

Income Tax (Trading and Other Income) Bill
Part 9 — Partnerships

361

 

(a)   

the income is treated as a post-cessation receipt for the purposes of

Chapter 18 of Part 2 (trading income: post-cessation receipts), but

(b)   

in the application of that Chapter to that income, section 243 (extent of

charge to tax) is omitted.

(3)   

In the case of income from a property business—

5

(a)   

the income is treated as a post-cessation receipt from a UK property

business for the purposes of Chapter 10 of Part 3 (property income:

post-cessation receipts), but

(b)   

in the application of that Chapter to that income, section 350 (extent of

charge to tax) is omitted.

10

(4)   

In the case of income from another source, the income is taxed as if the person

continued to possess that source.

845     

Valuing unremittable income

(1)   

If no claim is made under section 842 in relation to unremittable income arising

in a territory outside the United Kingdom, the amount of the income to be

15

taken into account for income tax purposes is determined as follows.

(2)   

If the currency in which the income is denominated has a generally recognised

market value in the United Kingdom, the amount is determined by reference

to that value.

(3)   

In any other case, the amount is determined according to the official rate of

20

exchange of the territory where the income arises.

Part 9

Partnerships

Introduction

846     

Overview of Part 9

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This Part contains some special rules about partnerships.

847     

General provisions

(1)   

In this Act persons carrying on a trade in partnership are referred to

collectively as a “firm”.

(2)   

The provisions of this Part are expressed to apply to trades but unless

30

otherwise indicated (whether expressly or by implication) also apply—

(a)   

to professions, and

(b)   

in the case of this section and sections 849, 850, 857 and 858 to

businesses that are not trades or professions.

(3)   

In those sections as applied by subsection (2)(b)—

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(a)   

references to a trade are references to a business, and

(b)   

references to the profits of a trade are references to the income arising

from a business.

 
 

 
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