Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

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Chapter 2 — Transfer of assets abroad
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section 683 (restrictions on particulars to be provided by banks).
682
Restrictions on particulars to be provided by solicitors
(1)
In relation to anything done by a solicitor on behalf of a client who does not
consent to the information otherwise required from the solicitor under section
681 being provided, the solicitor may not be compelled under that section to do
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more than—
(a)
state that the solicitor is or was acting on behalf of a client, and
(b)
give the name and address of the client and any relevant person.
(2)
In the case of anything done by the solicitor in connection with the transfer of
any asset by or to an individual who is ordinarily UK resident to or by a body
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corporate to which subsection (6) applies, the transferor and the transferee are
relevant persons.
(3)
In the case of anything done by the solicitor in connection with any associated
operation in relation to any such transfer, the persons concerned in the
associated operations are relevant persons.
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(4)
In the case of anything done by the solicitor in connection with the formation
or management of a body corporate to which subsection (6) applies, the body
corporate is a relevant person.
(5)
In the case of anything done by the solicitor in connection with—
(a)
the creation of any settlement as a result of which income becomes
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payable to a person abroad, or
(b)
the execution of the trusts of any such settlement,

the settlor and that person are relevant persons.
(6)
This subsection applies to bodies corporate resident or incorporated outside
the United Kingdom which—
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(a)
are, or if UK resident would be, close companies, and
(b)
are not companies whose business consists wholly or mainly of the
carrying on of a trade or trades.
(7)
In this section “settlement” and “settlor” have the meanings given by section
620 of ITTOIA 2005.
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(8)
In the application of this section to Scotland, any reference to the trusts of a
settlement is a reference to the purposes of the settlement.
683
Restrictions on particulars to be provided by banks
(1)
Section 681 does not oblige a bank to provide any particulars of any ordinary
banking transactions between the bank and a customer carried out in the
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ordinary course of banking business, unless subsection (2) or (3) applies.
(2)
This subsection applies if the bank has acted or is acting on behalf of the
customer in connection with—
(a)
the creation of any settlement as a result of which income becomes
payable to a person abroad, or
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(b)
the execution of the trusts of any such settlement.

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Chapter 3 — Transactions in land
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(3)
This subsection applies if the bank has acted or is acting on behalf of the
customer in connection with the formation or management of a body corporate
to which section 682(6) applies.
(4)
In this section—
“bank” has the meaning given by section 925, and
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“settlement” has the meaning given by section 620 of ITTOIA 2005.
(5)
In the application of this section to Scotland, any reference to the trusts of a
settlement is a reference to the purposes of the settlement.
684
Special Commissioners’ jurisdiction on appeals
The jurisdiction of the Special Commissioners on any appeal includes
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jurisdiction to affirm or replace any decision taken by an officer of Revenue and
Customs in exercise of the officer’s functions under—
(a)
section 670 (exemption: all relevant transactions post-4 December 2005
transactions),
(b)
section 671 (meaning of “commercial transaction”),
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(c)
section 672 (exemption: all relevant transactions pre-5 December 2005
transactions),
(d)
section 675 (partial exemption where later associated operations fail
conditions),
(e)
section 676(2) (no duplication of charges: choice of persons in relation
20
to whom income is taken into account).
Chapter 3
Transactions in land
Introduction
685
Overview of Chapter
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(1)
This Chapter has effect for the purpose of preventing the avoidance of income
tax by persons concerned with land or the development of land.
(2)
This Chapter imposes a charge to income tax in some circumstances where
gains of a capital nature are obtained from disposing of land.
686
Meaning of disposing of land
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(1)
For the purposes of this Chapter land is disposed of if the property in the land
or control over the land is effectively disposed of—
(a)
by one or more transactions, or
(b)
by any arrangement or scheme.
(2)
It does not matter for the purposes of subsection (1) if the transactions,
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arrangement or scheme concern—
(a)
the land, or
(b)
property deriving its value from the land (see section 705(2)).
(3)
See also—

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section 694 (transactions, arrangements, sales and realisations relevant for
this Chapter), and
section 695 (tracing value).
687
Priority of other income tax provisions
This Chapter has effect subject to—
5
(a)
Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as
income of settlor), and
(b)
any other provision of the Tax Acts treating income as belonging to a
particular person.
Charge on gains from transactions in land
10
688
Charge to tax on gains from transactions in land
(1)
Income tax is charged on income treated as arising under section 689 (income
treated as arising when gains obtained from some land disposals).
(2)
For exemptions from the charge, see—
section 698 (exemption: gain attributable to period before intention to
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develop formed),
section 699 (exemption: disposals of shares in companies holding land as
trading stock), and
section 700 (exemption: private residences).
689
Income treated as arising when gains obtained from some land disposals
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(1)
This section applies if—
(a)
any of the conditions specified in subsection (3) is met as respects land,
(b)
a gain of a capital nature is obtained from the disposal of all or part of
the land,
(c)
all or part of the land is situated in the United Kingdom, and
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(d)
a person within section 690(1)(a), (b) or (c) obtains the gain.
(2)
The gain is treated for income tax purposes as income arising when the gain is
realised.
(3)
The conditions are that—
(a)
the land is acquired with the sole or main object of realising a gain from
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disposing of all or part of the land,
(b)
any property deriving its value from the land is acquired with the sole
or main object of realising a gain from disposing of all or part of the
land,
(c)
the land is held as trading stock, and
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(d)
the land is developed with the sole or main object of realising a gain
from disposing of all or part of the land when developed.
(4)
It does not matter for the purposes of this section whether the person within
section 690(1)(a), (b) or (c) obtains the gain for that person or another person.

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(5)
For the purposes of this section, if, for example by a premature sale, a person
(“A”) directly or indirectly transmits the opportunity of realising a gain to
another person (“B”), A obtains B’s gain for B.
(6)
For the meaning of “another person”, see section 696.
690
Person obtaining gain
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(1)
The persons referred to in section 689(1)(d) are—
(a)
the person acquiring, holding or developing the land,
(b)
a person connected with a person within paragraph (a), and
(c)
a person who is a party to, or concerned in, an arrangement or scheme
within subsection (2).
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(2)
An arrangement or scheme is within this subsection if—
(a)
it is effected as respects all or part of the land, and
(b)
it enables a gain to be realised—
(i)
by any indirect method, or
(ii)
by any series of transactions.
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(3)
For the purposes of this section any number of transactions may be regarded
as constituting a single arrangement or scheme if—
(a)
a common purpose can be discerned in them, or
(b)
there is other sufficient evidence of a common purpose.
691
Income charged
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(1)
Tax is charged under this Chapter on the full amount of income treated as
arising in the tax year.
(2)
See section 693 (method of calculating gain) for how to calculate the amount of
income charged.
692
Person liable
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(1)
The person liable for any tax charged under this Chapter on income is the
person whose income it is.
(2)
The general rule is that that person is the person who realises the gain.
(3)
But that rule is subject to subsections (4) and (6).
(4)
If all or any part of the gain accruing to a person (“A”) is derived from value
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provided directly or indirectly by another person (“B”), the income is B’s.
(5)
Subsection (4) applies whether or not the value is put at the disposal of A.
(6)
If all or any part of the gain accruing to a person is derived from an opportunity
of realising a gain provided directly or indirectly by another person, the
income is the other person’s.
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(7)
For the meaning of “another person”, see section 696.
(8)
In applying section 949 (territorial scope of charges including the charge under
this Chapter) for the purposes of this Chapter, an amount treated as arising to
a non-UK resident under section 689 is treated as being from a source in the

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United Kingdom so far (and only so far) as the land to which the disposal
relates is in the United Kingdom.
693
Method of calculating gain
(1)
Subsections (3) to (5) apply for calculating a gain for the purposes of this
Chapter.
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(2)
But, except so far as those subsections make provision, such method is to be
used for those purposes as is just and reasonable in the circumstances.
(3)
The method must—
(a)
take into account the value of what is obtained for disposing of the
land, and
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(b)
allow only such expenses as are attributable to the land disposed of.
(4)
If a freehold is acquired and on disposal the reversion is retained, account may
be taken of the way in which trading profits are calculated in such a case.
(5)
Account may be taken of the adjustments to be made in calculating trading
profits under section 158 of ITTOIA 2005 (lease premiums etc: reduction of
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receipts).
(6)
In this section “trading profits” means the profits under Part 2 of ITTOIA 2005
(trading profits) of a person dealing in land.
(7)
In the application of this section in Scotland—
“freehold” means the interest of the owner, and
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“reversion” means the interest of the landlord in property subject to a
lease.
(8)
See also section 697 (valuations and apportionments).
Further provisions relevant to the charge
694
Transactions, arrangements, sales and realisations relevant for Chapter
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(1)
For the purposes of this Chapter, account is to be taken of any method,
however indirect, by which—
(a)
any property or right is transferred or transmitted, or
(b)
the value of any property or right is enhanced or diminished.
(2)
Accordingly—
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(a)
the occasion of the transfer or transmission of any property or right
however indirect, and
(b)
the occasion when the value of any property or right is enhanced,

may be an occasion when tax is charged under this Chapter.
(3)
Subsections (1) and (2) apply in particular—
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(a)
to sales, contracts and other transactions made otherwise than for full
consideration or for more than full consideration,
(b)
to any method by which any property or right, or the control of any
property or right, is transferred or transmitted by assigning—
(i)
share capital or other rights in a company,
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(ii)
rights in a partnership, or

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(iii)
an interest in settled property,
(c)
to the creation of an option affecting the disposition of any property or
right and the giving of consideration for granting it,
(d)
to the creation of a requirement for consent affecting such a disposition
and the giving of consideration for granting it,
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(e)
to the creation of an embargo affecting such a disposition and the
giving of consideration for releasing it, and
(f)
to the disposal of any property or right on the winding up, dissolution
or termination of a company, partnership or trust.
695
Tracing value
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(1)
This section applies if it is necessary to determine the extent to which the value
of any property or right is derived from any other property or right for the
purposes of this Chapter.
(2)
Value may be traced through any number of companies, partnerships and
trusts.
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(3)
The property held by a company, partnership or trust must be attributed to the
shareholders, partners or beneficiaries at each stage in such manner as is
appropriate in the circumstances.
696
Meaning of “another person”
(1)
For the purposes of this Chapter references to other persons are to be read in
20
accordance with subsections (2) to (4).
(2)
A partnership or partners in a partnership may be regarded as a person or
persons distinct from the individuals or other persons who are for the time
being partners.
(3)
The trustees of settled property may be regarded as persons distinct from the
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individuals or other persons who are for the time being the trustees.
(4)
Personal representatives may be regarded as persons distinct from the
individuals or other persons who are for the time being personal
representatives.
697
Valuations and apportionments
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(1)
All such valuations are to be made as are appropriate to give effect to this
Chapter.
(2)
For the purposes of this Chapter, any expenditure, receipt, consideration or
other amount may be apportioned by such method as is just and reasonable in
the circumstances.
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Exemptions
698
Exemption: gain attributable to period before intention to develop formed
(1)
This section applies if—

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(a)
income is treated as arising because the condition mentioned in section
689(3)(d) is met (land developed with sole or main object of realising a
gain from its disposal when developed), and
(b)
part of the income is fairly attributable to a period before the intention
to develop was formed.
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(2)
No liability to income tax arises under this Chapter in respect of that part of the
income.
(3)
In applying this section account must be taken of the treatment under Part 2 of
ITTOIA 2005 (trading profits) of a person who appropriates land as trading
stock.
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699
Exemption: disposals of shares in companies holding land as trading stock
(1)
No liability to income tax arises under this Chapter in respect of a gain on
property deriving value from land if—
(a)
the gain is obtained by the holder of shares,
(b)
the gain arises as a result of the holder of shares falling within section
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690(1)(a) or (b) (persons acquiring, holding or developing land and
connected persons), and
(c)
the circumstances are such as are mentioned in subsections (2) and (3).
(2)
The gain arises on a disposal of shares in—
(a)
a company which holds that land as trading stock, or
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(b)
a company which directly or indirectly owns at least 90% of the
ordinary share capital of another company which itself holds that land
as trading stock.
(3)
All the land so held is disposed of—
(a)
in the normal course of its trade by the company which holds it, and
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(b)
so as to procure that all opportunity of profit in respect of the land
arises to that company.
(4)
This section does not affect any liability as a result of any person falling within
section 690(1)(c) (parties to arrangements and schemes, etc).
700
Exemption: private residences
30
No liability to income tax arises under this Chapter in respect of a gain accruing
to an individual if—
(a)
the gain is exempt from capital gains tax as a result of sections 222 to
226 of TCGA 1992 (private residences), or
(b)
it would be so exempt but for section 224(3) of that Act (residences
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acquired partly with a view to making a gain).
Recovery of tax
701
Recovery of tax where consideration receivable by person not assessed
(1)
This section applies if a person (“A”) is assessed to tax under this Chapter in
respect of consideration receivable by another person (“B”).
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