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Income Tax Bill


Income Tax Bill
Part 12 — Tax avoidance
Chapter 2 — Transfer of assets abroad

350

 

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.

 
 

Income Tax Bill
Part 12 — Tax avoidance
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

10

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”),

15

(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

25

(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

30

(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—

 
 

Income Tax Bill
Part 12 — Tax avoidance
Chapter 3 — Transactions in land

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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

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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.

 
 

Income Tax Bill
Part 12 — Tax avoidance
Chapter 3 — Transactions in land

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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

5

(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

25

(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

30

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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Part 12 — Tax avoidance
Chapter 3 — Transactions in land

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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.

5

(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

10

(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

15

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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Part 12 — Tax avoidance
Chapter 3 — Transactions in land

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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,

5

(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

10

(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

30

(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—

 
 

Income Tax Bill
Part 12 — Tax avoidance
Chapter 3 — Transactions in land

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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.

5

(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.

10

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

15

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

20

(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

25

(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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