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651 | Meaning of “person abroad” etc |
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(1) | In this Chapter “person abroad” means a person who is resident or domiciled |
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outside the United Kingdom. |
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(2) | For the purposes of this Chapter, the following persons are treated as resident |
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outside the United Kingdom— |
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(a) | a UK resident body corporate that is incorporated outside the United |
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(b) | the person treated as neither UK resident nor ordinarily UK resident |
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under section 475(3) (trustees of settlements), and |
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(c) | persons treated as non-UK resident under section 767(4) (personal |
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652 | Meaning of “associated operation” |
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(1) | In this Chapter “associated operation”, in relation to a transfer of assets, means |
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an operation of any kind effected by any person in relation to— |
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(a) | any of the assets transferred, |
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(b) | any assets directly or indirectly representing any of the assets |
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(c) | the income arising from any assets within paragraph (a) or (b), or |
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(d) | any assets directly or indirectly representing the accumulations of |
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income arising from any assets within paragraph (a) or (b). |
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(2) | It does not matter whether the operation is effected before, after or at the same |
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Charge where power to enjoy income |
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653 | Charge to tax on income treated as arising under section 654 |
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(1) | The charge under this section applies for the purpose of preventing the |
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avoiding of liability to income tax by individuals who are ordinarily UK |
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resident by means of relevant transfers. |
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(2) | Income tax is charged on income treated as arising to such an individual under |
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section 654 (individuals with power to enjoy income as a result of relevant |
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(3) | Tax is charged under this section on the amount of income treated as arising in |
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(4) | But see section 657 (special rules where benefit provided out of income of |
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(5) | The person liable for any tax charged under this section is the individual to |
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whom the income is treated as arising. |
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(6) | For rules about the reduction in the amount charged in some circumstances |
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and the availability of deductions and reliefs, see— |
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section 658 (reduction in amount charged where controlled foreign |
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section 679 (deductions and reliefs where individual charged under this |
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(7) | For exemptions from the charge under this section, see sections 669 to 675 |
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(exemptions where no tax avoidance purpose or genuine commercial |
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654 | Individuals with power to enjoy income as a result of relevant transactions |
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(1) | Income is treated as arising to such an individual as is mentioned in section |
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653(1) in a tax year for income tax purposes if conditions A and B are met. |
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(2) | Condition A is that the individual has power in the tax year to enjoy income of |
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a person abroad as a result of— |
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(b) | one or more associated operations, or |
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(c) | a relevant transfer and one or more associated operations. |
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(3) | Condition B is that the income would be chargeable to income tax if it were the |
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individual’s and received by the individual in the United Kingdom. |
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(4) | For the purposes of subsection (2), it does not matter whether the income may |
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be enjoyed immediately or only later. |
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(5) | It does not matter for the purposes of this section— |
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(a) | whether the income would be chargeable to income tax apart from |
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(b) | whether the individual is ordinarily UK resident at the time when the |
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relevant transfer is made, or |
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(c) | whether the avoiding of liability to income tax is a purpose for which |
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the transfer is effected. |
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(6) | For the circumstances in which an individual is treated as having the power to |
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enjoy income for the purposes of this section, see section 655. |
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655 | When an individual has power to enjoy income of person abroad |
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(1) | For the purposes of section 654, an individual is treated as having power to |
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enjoy income of a person abroad if any of the enjoyment conditions are met. |
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(2) | In subsection (1) “the enjoyment conditions” means conditions A to E as |
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specified in section 656. |
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(3) | In determining whether an individual has power to enjoy income for the |
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purposes of section 654, regard must be had to the substantial result and effect |
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of all the relevant transactions. |
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(4) | In making that determination all benefits which may at any time accrue to the |
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individual as a result of the transfer and any associated operations must be |
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taken into account, irrespective of— |
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(a) | the nature or form of the benefits, or |
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(b) | whether the individual has legal or equitable rights in respect of the |
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656 | The enjoyment conditions |
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(1) | Condition A is that the income is in fact so dealt with by any person as to be |
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calculated at some time to enure for the benefit of the individual, whether in |
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the form of income or not. |
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(2) | Condition B is that the receipt or accrual of the income operates to increase the |
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(a) | of any assets the individual holds, or |
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(b) | of any assets held for the individual’s benefit. |
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(3) | Condition C is that the individual receives or is entitled to receive at any time |
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any benefit provided or to be provided out of the income or related money. |
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(4) | In subsection (3) “related money” means money which is or will be available |
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for the purpose of providing the benefit as a result of the effect or successive |
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(b) | on any assets which directly or indirectly represent the income, |
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| of the associated operations referred to in section 654(2). |
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(5) | Condition D is that the individual may become entitled to the beneficial |
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enjoyment of the income if one or more powers are exercised or successively |
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(6) | For the purposes of subsection (5) it does not matter— |
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(a) | who may exercise the powers, or |
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(b) | whether they are exercisable with or without the consent of another |
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(7) | Condition E is that the individual is able in any manner to control directly or |
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indirectly the application of the income. |
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657 | Special rules where benefit provided out of income of person abroad |
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(1) | This section applies if an individual has power to enjoy income of a person |
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abroad for the purposes of section 654 because of receiving any such benefit as |
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is referred to in section 656(3) (benefit provided out of income of person |
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(2) | Despite anything in section 653, the individual is liable to income tax under |
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that section for the tax year in which the benefit is received on the whole of the |
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amount or value of that benefit. |
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(3) | But subsection (2) does not apply so far as it is shown that the benefit derives |
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directly or indirectly from income on which the individual has already been |
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charged to income tax for that tax year or a previous tax year. |
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658 | Reduction in amount charged where controlled foreign company involved |
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(1) | This section applies if— |
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(a) | an amount of the chargeable profits for an accounting period of a |
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company (“the controlled foreign company”) is apportioned to one or |
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more UK resident companies under section 747(3) of ICTA (imputation |
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of chargeable profits and creditable tax of controlled foreign |
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(b) | as a result of section 747(4) of that Act those companies are chargeable |
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in respect of the amount (“the chargeable amount”) of the chargeable |
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profits so apportioned to them, and |
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(c) | apart from this section, the amount of income treated as arising to an |
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individual under section 654 for a tax year would be or include a sum |
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forming part of the controlled foreign company’s chargeable profits for |
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(2) | The amount of income so treated is reduced by—![equation: cross[char[S],over[times[char[C],char[A]],times[char[C],char[P]]]]](missing.gif) |
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S is the sum forming part of the controlled foreign company’s chargeable |
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profits for that accounting period, |
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CA is the chargeable amount, and |
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CP is the controlled foreign company’s chargeable profits for that |
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(3) | The following provisions of ICTA apply for the purposes of this section as they |
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apply for the purposes of Chapter 4 of Part 17 of that Act— |
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section 747(6) (interpretation, in relation to a non-UK resident company, |
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of references to chargeable profits for an accounting period and |
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section 751(1) to (5A) (accounting periods). |
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659 | Non-domiciled individuals |
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(1) | An individual is not chargeable to income tax under section 653 in respect of |
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any income treated as arising to the individual under section 654 if conditions |
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(2) | Condition A is that the individual is domiciled outside the United Kingdom. |
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(3) | Condition B is that if the income had in fact been the individual’s income, |
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because of being so domiciled the individual would not have been chargeable |
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to income tax in respect of it. |
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Charge where capital sums received |
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660 | Charge to tax on income treated as arising under section 661 |
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(1) | The charge under this section applies for the purpose of preventing the |
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avoiding of liability to income tax by individuals who are ordinarily UK |
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resident by means of relevant transfers. |
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(2) | Income tax is charged on income treated as arising to such an individual under |
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section 661 (individuals receiving capital sums as a result of relevant |
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(3) | Tax is charged under this section on the amount of income treated as arising in |
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(4) | The person liable for any tax charged under this section is the individual to |
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whom the income is treated as arising. |
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(5) | For exemptions from the charge under this section, see sections 669 to 675 |
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(exemptions where no tax avoidance purpose or genuine commercial |
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(6) | For rules about the availability of deductions and reliefs where income is |
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charged under this section, see section 679 (deductions and reliefs where |
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individual charged under section 653 or this section). |
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661 | Individuals receiving capital sums as a result of relevant transactions |
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(1) | Income is treated as arising to such an individual as is referred to in section |
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660(1) in a tax year for income tax purposes if— |
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(a) | income has become the income of a person abroad as a result of— |
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(ii) | one or more associated operations, or |
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(iii) | a relevant transfer and one or more associated operations, and |
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(b) | the capital receipt conditions are met in respect of the individual in the |
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tax year (see section 662). |
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(2) | Section 658 (reduction in amount charged where controlled foreign company |
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involved) applies for determining the amount of income treated as arising |
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under subsection (1) as it applies for determining the amount so treated under |
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(3) | It does not matter for the purposes of this section— |
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(a) | whether the income would be chargeable to income tax apart from |
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(b) | whether the individual is ordinarily UK resident at the time when the |
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relevant transfer abroad is made, or |
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(c) | whether the avoiding of liability to income tax is a purpose for which |
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that transfer is effected. |
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662 | The capital receipt conditions |
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(1) | For the purposes of section 661(1), the capital receipt conditions are met in |
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respect of the individual in a tax year (“the relevant year”) if— |
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(i) | in the relevant year the individual receives or is entitled to |
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receive any capital sum, whether before or after the relevant |
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(ii) | in any earlier tax year the individual has received any capital |
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sum, whether before or after the relevant transfer, and |
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(b) | the payment of that sum is (or, in the case of an entitlement, would be) |
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in any way connected with any relevant transaction. |
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(2) | But subsection (1)(a)(ii) does not apply merely because of the receipt of a sum |
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by way of loan if the loan is wholly repaid before the relevant year begins. |
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(3) | In subsection (1) “capital sum” means— |
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(a) | any sum paid or payable by way of loan or repayment of a loan, and |
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(b) | any other sum paid or payable— |
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(i) | otherwise than as income, and |
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(ii) | not for full consideration in money or money’s worth. |
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(4) | For the purposes of subsection (1), a sum is treated as a capital sum which the |
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individual (“A”) receives or is entitled to receive if another person receives or |
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is entitled to receive it— |
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(b) | as a result of the assignment by A of A’s right to receive it. |
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663 | Non-domiciled individuals |
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(1) | An individual is not chargeable to income tax under section 660 in respect of |
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any income treated as arising to the individual under section 661 if conditions |
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(2) | Condition A is that the individual is domiciled outside the United Kingdom. |
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(3) | Condition B is that if the income had in fact been the individual’s income, |
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because of being so domiciled the individual would not have been chargeable |
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to income tax in respect of it. |
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Charge where benefit received |
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664 | Charge to tax on income treated as arising under section 665 |
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(1) | Income tax is charged on income treated as arising to an individual under |
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section 665 (non-transferors receiving a benefit as a result of relevant |
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(2) | Tax is charged under this section on the amount of income treated as arising |
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(3) | The person liable for any tax charged under this section is the individual to |
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whom the income is treated as arising. |
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(4) | For exemptions from the charge under this section, see sections 669 to 675 |
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(exemptions where no tax avoidance purpose or genuine commercial |
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665 | Non-transferors receiving a benefit as a result of relevant transactions |
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(1) | This section applies if— |
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(a) | a relevant transfer occurs, |
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(b) | an individual who is ordinarily UK resident receives a benefit, |
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(c) | the benefit is provided out of assets which are available for the purpose |
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(ii) | one or more associated operations, |
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(d) | the individual is not liable to income tax under section 653 or 660 by |
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reference to the transfer and would not be so liable if the effect of |
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sections 659 and 663 were ignored, and |
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(e) | the individual is not liable to income tax on the amount or value of the |
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benefit (apart from section 664). |
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(2) | Income is treated as arising to the individual for income tax purposes for any |
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tax year for which section 666 provides that income arises. |
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(3) | Also see that section for the amount of income treated as arising for any such |
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666 | Income charged under section 664 |
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(1) | To find the amount (if any) of the income treated as arising under section 665(2) |
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for any tax year in respect of benefits provided as mentioned in section |
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665(1)(c) take the following steps. |
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| Identify the amount or value of such benefits received by the individual in the |
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tax year and in any earlier tax years in which section 665 has applied. |
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| The sum of those amounts and values is “the total benefits”. |
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| Deduct from the total benefits the total amount of income treated as arising to |
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the individual under section 665(2) for earlier tax years as a result of the |
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relevant transfer or associated operations. |
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| The result is “the total untaxed benefits”. |
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| Identify the amount of any income which— |
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(a) | arises in the tax year to a person abroad, and |
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(b) | as a result of the relevant transfer or associated operations can be used |
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directly or indirectly for providing a benefit for the individual. |
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| That amount is “the relevant income of the tax year” in relation to the |
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individual and the tax year. |
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| Add together the relevant income of the tax year and the relevant income of |
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earlier tax years in relation to the individual (identified as mentioned in Step 3). |
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| The sum of those amounts is “total relevant income”. |
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| Deduct from total relevant income— |
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(a) | the amount deducted at Step 2, and |
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(b) | any other amount which may not be taken into account because of |
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section 676(1) and (2) (no duplication of charges). |
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| The result is “the available relevant income”. |
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| Compare the total untaxed benefits and the available relevant income. |
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| The amount of the income treated as arising under section 665(2) for any tax |
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year is the total untaxed benefits unless the available relevant income is lower. |
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| If the available relevant income is lower, it is the amount of income treated as |
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(2) | Subsection (1) is subject to section 667 (reduction in amount charged: previous |
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capital gains tax charge). |
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