Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 1 — Limits on liability to income tax of non-UK residents
385

“relevant period” means—
(a)
a tax year, if this section applies for the purposes of section 746,
or
(b)
an accounting period, if this section applies for the purposes of
section 749.
5
Supplementary
758
Meaning of “disregarded savings and investment income”
(1)
For the purposes of this Chapter income is “disregarded savings and
investment income” if—
(a)
it is chargeable under Chapter 3 or 5 of Part 4 of ITTOIA 2005
10
(dividends etc from UK resident companies and stock dividends from
UK resident companies), or
(b)
it is within subsection (2) and is not relevant foreign income.
(2)
Income is within this subsection if it is chargeable under—
(a)
Chapter 2 of Part 4 of ITTOIA 2005 (interest),
15
(b)
Chapter 7 of that Part (purchased life annuity payments),
(c)
Chapter 8 of that Part (profits from deeply discounted securities),
(d)
Chapter 10 of that Part (distributions from unauthorised unit trusts), or
(e)
Chapter 11 of that Part (transactions in deposits).
759
Meaning of “disregarded annual payments”
20
For the purposes of this Chapter income is “disregarded annual payments” if
it is not relevant foreign income and is chargeable under—
(a)
section 579 of ITTOIA 2005, so far as it relates to annual payments
(royalties etc from intellectual property),
(b)
Chapter 4 of Part 5 of that Act, so far as it relates to annual payments
25
(certain telecommunication rights: non-trading income), or
(c)
Chapter 7 of Part 5 of that Act (annual payments not otherwise
charged).
760
Meaning of “investment manager” and “investment transaction”
(1)
In this Chapter “investment manager” means a person who provides
30
investment management services.
(2)
In this Chapter “investment transaction” means—
(a)
transactions in shares, stock, futures contracts, options contracts or
securities of any description not mentioned in this paragraph, but
excluding futures contracts or options contracts relating to land,
35
(b)
transactions consisting in the buying or selling of any foreign currency
or in the placing of money at interest, and
(c)
such other transactions as the Treasury may by regulations designate
for the purposes of this section.
(3)
For the purposes of subsection (2) a contract is not prevented from being a
40
futures contract or an options contract by the fact that a party is or may be
entitled to receive or liable to make, or entitled to receive and liable to make,

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 2 — Residence
386

only a payment of a sum (as opposed to a transfer of assets other than money)
in full settlement of all obligations.
761
Transactions through brokers and investment managers
(1)
For the purposes of this Chapter a person is regarded as carrying out a
transaction on behalf of another if the person—
5
(a)
undertakes the transaction, whether on behalf of or to the account of the
other, or
(b)
gives instructions for it to be so carried out by another.
(2)
In the case of a person who acts as a broker or investment manager as part only
of a business, this Chapter has effect as if that part were a separate business.
10
Chapter 2
Residence
762
Residence of individuals temporarily abroad
(1)
This section applies if—
(a)
an individual has left the United Kingdom for the purpose only of occasional
15
residence abroad, and
(b)
at the time of leaving the individual was both UK resident and
ordinarily UK resident.
(2)
Treat the individual as UK resident for the purpose of determining the
individual’s liability for income tax for any tax year during the whole or a part
20
of which the individual remains outside the United Kingdom for the purpose
only of occasional residence abroad.
763
Residence of individuals working abroad
(1)
This section applies for income tax purposes if an individual works full-time in
one or both of—
25
(a)
a foreign trade, and
(b)
a foreign employment.
(2)
In determining whether the individual is UK resident ignore any living
accommodation available in the United Kingdom for the individual’s use.
(3)
A trade is foreign if no part of it is carried on in the United Kingdom.
30
(4)
An employment is foreign if all of its duties are performed outside the United
Kingdom.
(5)
An employment is also foreign if in the tax year in question—
(a)
the duties of the employment are in substance performed outside the
United Kingdom, and
35
(b)
the only duties of the employment performed in the United Kingdom
are duties which are merely incidental to the duties of the employment
performed outside the United Kingdom in the year.
(6)
In this section—
“employment” includes an office, and
40

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 2 — Residence
387

“trade” includes profession and vocation.
764
Foreign income of individuals in the United Kingdom for temporary purpose
(1)
Subsection (2) applies in relation to an individual if—
(a)
the individual is in the United Kingdom for some temporary purpose
only and with no view to establishing the individual’s residence in the
5
United Kingdom, and
(b)
in the tax year in question the individual has not actually resided in the
United Kingdom at one or several times for a total period equal to 183
days (or more).

In determining whether an individual is within paragraph (a) ignore any living
10
accommodation available in the United Kingdom for the individual’s use.
(2)
Apply the following rules in determining the individual’s liability for income
tax.


Rule 1
15

In relation to pension or social security income arising from a source outside
the United Kingdom, treat the individual as non-UK resident for the purposes
of the following—
(a)
Chapter 4 of Part 9 of ITEPA 2003 (tax on foreign pensions),
(b)
Chapter 5A of that Part (tax on pensions under registered pension
20
schemes) but only if the income is an annuity under a registered
pension scheme within paragraph 1(1)(f) of Schedule 36 to FA 2004,
(c)
Chapter 10 of that Part (tax on employment-related annuities),
(d)
Chapter 15 of that Part (tax on voluntary annual payments),
(e)
section 647 of ITEPA 2003 (meaning of “foreign residence condition”)
25
but only in its application for the purposes of section 651 of that Act
(which provides an exemption for tax under Chapter 14 of Part 9 of that
Act), and
(f)
Chapter 6 of Part 10 of ITEPA 2003 (taxable foreign benefits).

See sections 566 and 657 of ITEPA 2003 for the definitions of “pension income”
30
and “social security income”.


Rule 2

In relation to income arising from a source outside the United Kingdom, treat
the individual as non-UK resident for the purposes of any charge under a
35
provision mentioned in section 830(2) of ITTOIA 2005 (which contains a list of
provisions under which relevant foreign income is charged).

In this rule “income” does not include income chargeable as a result of section
844 of ITTOIA 2005 (unremittable income: income charged on withdrawal of
relief after source ceases).
40
(3)
Paragraph (e) of Rule 1 in subsection (2) applies only if—
(a)
the individual makes a claim as mentioned in section 647(3)(a) of
ITEPA 2003, and
(b)
the Commissioners are satisfied that subsection (2) of this section
applies in relation to the individual.
45
(4)
Subsection (5) applies in relation to an individual if subsection (2) would have
applied in relation to the individual but for subsection (1)(b).

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 2 — Residence
388

(5)
Apply the rules set out in subsection (2) in determining the individual’s
liability for income tax.

But—
(a)
instead of treating the individual as non-UK resident in relation to the
income and for the purposes mentioned in those rules, treat the
5
individual as UK resident, and
(b)
ignore subsection (3).
765
Employment income of individuals in the United Kingdom for temporary
purpose
(1)
Subsection (2) applies in relation to an individual if—
10
(a)
the individual is in the United Kingdom for some temporary purpose
only and with no intention of establishing the individual’s residence in
the United Kingdom, and
(b)
during the tax year in question the individual spends (in total) less than
183 days in the United Kingdom.
15

In determining whether an individual is within paragraph (a) ignore any living
accommodation available in the United Kingdom for the individual’s use.
(2)
Treat the individual as non-UK resident for the purposes of Chapters 4 and 5
of Part 2 of ITEPA 2003 (which set out rules for determining taxable earnings
from employment).
20
(3)
Subsection (4) applies in relation to an individual if subsection (2) would have
applied in relation to the individual but for subsection (1)(b).
(4)
Treat the individual as UK resident for the purposes of the provisions
mentioned in subsection (2).
766
Visiting forces and staff of designated allied headquarters
25
(1)
This section applies to an individual who—
(a)
is a member of a visiting force of a designated country or of a civilian
component of such a force,
(b)
is in the United Kingdom, but only because of being a member of the
force or the civilian component, and
30
(c)
is not a British citizen, a British overseas territories citizen, a British
National (Overseas) or a British Overseas citizen.
(2)
For the purposes of subsection (1)—
(a)
members of the armed forces of a designated country who are attached
to a designated allied headquarters are treated as a visiting force of that
35
country, and
(b)
whether an individual is a member of a civilian component of such a
force is to be determined accordingly.
(3)
This section also applies to an individual who—
(a)
is of a category for the time being agreed between Her Majesty’s
40
Government in the United Kingdom and the other members of the
North Atlantic Council,
(b)
is employed by a designated allied headquarters,
(c)
is in the United Kingdom, but only because of being employed by the
designated allied headquarters, and
45

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 2 — Residence
389

(d)
is not a British citizen, a British overseas territories citizen, a British
National (Overseas) or a British Overseas citizen.
(4)
If this section applies to an individual throughout a period, the period is not
treated for income tax purposes as—
(a)
a period of residence in the United Kingdom, or
5
(b)
creating a change of the individual’s residence or domicile.
(5)
Subsection (4) does not affect the operation of section 56 or 460 of this Act or
section 278 of ICTA (residence etc of claimants) in relation to an individual for
any tax year.
(6)
Subsections (1) to (3) are to be interpreted as if—
10
(a)
they were in Part 1 of the Visiting Forces Act 1952 (c. 67), and
(b)
references in that Act to a country to which a provision of that Act
applies were references to a designated country.
(7)
In this section—
“allied headquarters” means an international military headquarters
15
established under the North Atlantic Treaty, and
“designated” means designated for the purpose in question by or under
an Order in Council made for giving effect to an international
agreement.
767
Residence of personal representatives
20
(1)
This section applies for income tax purposes if the personal representatives of
a deceased person (“D”) include one or more persons who are UK resident and
one or more persons who are non-UK resident.
(2)
If the following condition is met, the person or persons who are non-UK
resident are treated, in their capacity as personal representatives, as UK
25
resident.
(3)
The condition is that when D died D was UK resident, ordinarily UK resident
or domiciled in the United Kingdom.
(4)
If that condition is not met, the person or persons who are UK resident are
treated, in their capacity as personal representatives, as non-UK resident.
30
768
Residence rules for trustees and companies
(1)
See sections 475 and 476 for rules about the residence of the trustees of a
settlement.
(2)
See the following provisions for rules about the residence of companies—

sections 66 and 66A of FA 1988, and
35

section 249 of FA 1994.

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 3 — Jointly held property
390

Chapter 3
Jointly held property
769
Jointly held property
(1)
This section applies if income arises from property held in the names of
individuals—
5
(a)
who are married to, or are civil partners of, each other, and
(b)
who live together.
(2)
The individuals are treated for income tax purposes as beneficially entitled to
the income in equal shares.
(3)
But this treatment does not apply in relation to any income within any of the
10
following exceptions.


Exception A

Income to which neither of the individuals is beneficially entitled.

15

Exception B

Income in relation to which a declaration by the individuals under section 770
has effect (unequal beneficial interests).


Exception C
20

Income to which Part 9 of ITTOIA 2005 applies (partnerships).


Exception D

Income arising from a UK property business which consists of, or so far as it
includes, the commercial letting of furnished holiday accommodation (within
25
the meaning of Chapter 6 of Part 3 of ITTOIA 2005).


Exception E

Income consisting of a distribution arising from property consisting of—
(a)
shares in or securities of a close company to which one of the
30
individuals is beneficially entitled to the exclusion of the other, or
(b)
such shares or securities to which the individuals are beneficially
entitled in equal or unequal shares.

“Shares” and “securities” have the same meaning as in section 254 of ICTA.

35

Exception F

Income to which one of the individuals is beneficially entitled so far as it is
treated as a result of any other provision of the Income Tax Acts as—
(a)
the income of the other individual, or
(b)
the income of a third party.
40
770
Jointly held property: declarations of unequal beneficial interests
(1)
The individuals may make a joint declaration under this section if—
(a)
one of them is beneficially entitled to the income to the exclusion of the
other, or

Income Tax Bill
Part 13 — Income tax liability: miscellaneous rules
Chapter 4 — Other miscellaneous rules
391

(b)
they are beneficially entitled to the income in unequal shares,

and their beneficial interests in the income correspond to their beneficial
interests in the property from which it arises.
(2)
The declaration must state the beneficial interests of the individuals in—
(a)
the income to which the declaration relates, and
5
(b)
the property from which that income arises.
(3)
The declaration has effect only if notice of it is given to an officer of Revenue
and Customs—
(a)
in such form and manner as the Commissioners for Her Majesty’s
Revenue and Customs may prescribe, and
10
(b)
within the period of 60 days beginning with the date of the declaration.
(4)
The declaration has effect in relation to income arising on or after the date of
the declaration.
(5)
The declaration continues to have effect until such time (if any) as there is a
change in the beneficial interests of the individuals in either—
15
(a)
the income to which the declaration relates, or
(b)
the property from which that income arises.
Chapter 4
Other miscellaneous rules
771
Local authorities and local authority associations
20
(1)
A local authority in the United Kingdom is not liable to income tax in respect
of its income.
(2)
A local authority association in the United Kingdom is not liable to income tax
in respect of its income.
(3)
Tax is repayable as a result of subsection (1) or (2) only if a claim for repayment
25
is made.
772
Issue departments of the Reserve Bank of India and the State Bank of
Pakistan
No liability to income tax arises in respect of the income of the issue
department of—
30
(a)
the Reserve Bank of India constituted under an Act of the Indian
legislature called the Reserve Bank of India Act 1934, or
(b)
the State Bank of Pakistan constituted under orders made under section
9 of the Indian Independence Act 1947 (c. 30).
773
Government securities held by non-UK resident central banks
35
(1)
No liability to income tax arises in respect of income from securities which is—
(a)
income payable out of the public revenue of the United Kingdom, and
(b)
income of a bank, or the issue department of a bank, to which this
section applies for the time being.