Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

Income Tax Bill
Part 13 — Tax avoidance
Chapter 2 — Transfer of assets abroad
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741
Application of section 742 (partial exemption)
(1)
Section 742 (partial exemption where later associated operations fail
conditions) applies if—
(a)
an individual is liable to tax because of section 720 or 727 for a tax year
(the “taxable year”) because condition B in section 737(4) (genuine
5
commercial transaction: post-4 December 2005 transactions) is not met,
and
(b)
subsections (2) and (3) apply.
(2)
This subsection applies if—
(a)
since the relevant transfer there has been at least one tax year for which
10
the individual was not so liable by reference to the relevant transactions
effected before the end of the year, and
(b)
the individual was not so liable for that year because—
(i)
condition B in section 737(4) was met, or
(ii)
condition B in section 739(4) (genuine commercial transaction:
15
pre-5 December 2005 transactions) was met.
(3)
This subsection applies if the income by reference to which the individual is
liable to tax for the taxable year is attributable—
(a)
partly to relevant transactions by reference to which one of those
conditions was met for the last exempt tax year, and
20
(b)
partly to associated operations not falling within paragraph (a).
(4)
For the purposes of this section a tax year is exempt if—
(a)
it is one of the tax years mentioned in subsection (2), and
(b)
there is no earlier tax year for which the individual was liable to tax
because of section 720 or 727 by reference to the relevant transactions or
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any of them.
(5)
References in this section to a person being liable to tax for a tax year because
of section 720 or 727 include references to the individual being so liable had any
income been treated as arising to the individual for that year under section 721
or 728.
30
742
Partial exemption where later associated operations fail conditions
(1)
If this section applies, the individual is liable to tax under this Chapter only in
respect of part of the income for which the individual would otherwise be
liable.
(2)
That part is so much of the income as appears to an officer of Revenue and
35
Customs to be justly and reasonably attributable to the operations mentioned
in section 741(3)(b) in all the circumstances of the case.
(3)
Those circumstances include how far those operations or any of them directly
or indirectly affect—
(a)
the nature or amount of any person’s income, or
40
(b)
any person’s power to enjoy any income.

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Chapter 2 — Transfer of assets abroad
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General
743
No duplication of charges
(1)
No amount of income may be taken into account more than once in charging
income tax under this Chapter.
(2)
If there is a choice about the persons in relation to whom any amount of income
5
may be taken into account in charging income tax under this Chapter, it is to
be taken into account—
(a)
in relation to such one or more of them as appears to an officer of
Revenue and Customs to be just and reasonable, and
(b)
if more than one, in such respective proportions as appears to the
10
officer to be just and reasonable.
(3)
For the meaning of references in subsections (1) and (2) to an amount of income
taken into account in charging tax, see section 744.
(4)
If income treated as arising to an individual is charged to income tax under
section 720 or 727 and the individual subsequently receives that income, it is
15
treated as not being the individual’s income again for income tax purposes.
744
Meaning of taking income into account in charging income tax for section 743
(1)
References in section 743(1) and (2) (no duplication of charges) to an amount of
income taken into account in charging income tax are to be read as follows.
(2)
In the case of tax charged on income under section 720 (charge where income
20
enjoyed as a result of relevant transactions)—
(a)
if section 724(1) (benefit provided out of income of person abroad)
applies, they are references to an amount of the income out of which the
benefit is provided equal to the amount or value of the benefit charged,
and
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(b)
otherwise they are references to the amount of income charged.
(3)
In the case of tax charged on income under section 727 (charge where capital
sums received as a result of relevant transactions), they are references to the
amount of that income.
(4)
In the case of tax charged under section 731 (charge to tax on income treated as
30
arising to non-transferors where benefit received as a result of relevant
transfers), they are references to the amount of relevant income taken into
account under section 733 (income charged under section 731) in calculating
the amount to be charged in respect of the benefit for the tax year in question.
745
Rates of tax applicable to income charged under sections 720 and 727 etc
35
(1)
Income tax at the basic rate, the savings rate or the dividend ordinary rate is
not charged under section 720 or 727 in respect of any income so far as it has
borne tax at that rate by deduction or otherwise.
(2)
Subsection (1) does not affect the tax charged if section 724(2) applies (benefit
provided out of income of person abroad charged in year of receipt).
40
(3)
Subsection (4) applies to any income that—
(a)
is treated as arising to an individual under section 721 or 728, and

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Part 13 — Tax avoidance
Chapter 2 — Transfer of assets abroad
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(b)
apart from this Chapter is dividend income,

so far as subsection (1) does not apply to the income.
(4)
The charge to income tax under section 720 or, as the case may be, section 727
operates by treating the income as if it were income within section 19(2)
(meaning of “dividend income”).
5
746
Deductions and reliefs where individual charged under section 720 or 727
(1)
This section applies for the purpose of calculating the liability to income tax of
an individual charged under section 720 or 727.
(2)
The same deductions and reliefs are allowed as would have been allowed if the
income treated as arising to the individual under section 721 or 728 had
10
actually been received by the individual.
747
Amounts corresponding to accrued income profits and related interest
(1)
This subsection applies if a person—
(a)
would have been treated as—
(i)
making qualifying accrued income profits, or
15
(ii)
making qualifying accrued income profits of a greater amount,

in an interest period, but
(b)
is not so treated because of being resident or domiciled outside the
United Kingdom throughout any tax year in which the interest period
(or part of it) falls.
20
(2)
If subsection (1) applies, this Chapter applies as if the amount which the person
would be treated as making or, as the case may be, the additional amount were
income becoming payable to the person.
(3)
Accordingly, any reference in this Chapter to income of (or payable or arising
to) a person abroad must be read as including a reference to such an amount.
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(4)
This subsection applies if income consisting of interest which falls due at the
end of an interest period—
(a)
would have been income as respects which a person is entitled to an
exemption, or an exemption of a greater amount, from liability to
income tax under section 679 (interest on securities involving accrued
30
income losses: general), but
(b)
is not such income because it is income of a person who is resident or
domiciled outside the United Kingdom throughout any tax year in
which the interest period (or part of it) falls.
(5)
If subsection (4) applies, for the purposes of this Chapter the interest is treated
35
as reduced by the amount of the exemption or, as the case may be, the
additional exemption.
(6)
In this section—
(a)
expressions which are also used in Chapter 2 of Part 12 (accrued income
profits) have the same meaning as in that Chapter (but see subsection
40
(7)), and
(b)
“qualifying accrued income profits” means accrued income profits
which are treated as made—
(i)
under section 628(5), or

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(ii)
under section 630(2) in respect of a transfer of variable rate
securities.
(7)
In the case of qualifying accrued income profits within sub-paragraph (ii) of
the definition of that expression in subsection (6)(b)—
(a)
references in subsection (1)(a) to making qualifying accrued income
5
profits in an interest period are to be read as making them in the tax
year in which the settlement day falls, and
(b)
the reference in subsection (1)(b) to the interest period is to the period—
(i)
beginning with the day after the last day of the only or last
interest period of the securities, and
10
(ii)
ending with the settlement day.
Supplementary
748
Power to obtain information
(1)
An officer of Revenue and Customs may by notice require any person to
provide the officer with such particulars as the officer may reasonably require
15
for the purposes of this Chapter.
(2)
The officer may direct the time within which the particulars must be provided
and that time must be at least 30 days.
(3)
The particulars which a person must provide under this section, if required to
do so by a notice under subsection (1), include particulars about—
20
(a)
transactions with respect to which the person is or was acting on behalf
of others,
(b)
transactions which in the opinion of the officer should properly be
investigated for the purposes of this Chapter even though in the
person’s opinion no liability to income tax arises under this Chapter,
25
and
(c)
whether the person has taken or is taking any part and, if so, what part
in transactions of a description specified in the notice.
(4)
A solicitor is not treated as having taken part in a transaction for the purposes
of subsection (3)(c) merely because of giving professional advice to a client
30
about it.
(5)
This section is subject to—
section 749 (restrictions on particulars to be provided by solicitors), and
section 750 (restrictions on particulars to be provided by banks).
749
Restrictions on particulars to be provided by solicitors
35
(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
748 being provided, the solicitor may not be compelled under that section to do
more than—
(a)
state that the solicitor is or was acting on behalf of a client, and
40
(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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Chapter 2 — Transfer of assets abroad
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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.
5
(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
10
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—
15
(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.
20
(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.
750
Restrictions on particulars to be provided by banks
(1)
Section 748 does not oblige a bank to provide any particulars of any ordinary
banking transactions between the bank and a customer carried out in the
25
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
30
(b)
the execution of the trusts of any such settlement.
(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 749(6) applies.
(4)
In this section—
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“bank” has the meaning given by section 991, and
“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.
751
Special Commissioners’ jurisdiction on appeals
40
The jurisdiction of the Special Commissioners on any appeal includes
jurisdiction to affirm or replace any decision taken by an officer of Revenue and
Customs in exercise of the officer’s functions under—

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Part 13 — Tax avoidance
Chapter 3 — Transactions in land
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(a)
section 737 (exemption: all relevant transactions post-4 December 2005
transactions),
(b)
section 738 (meaning of “commercial transaction”),
(c)
section 739 (exemption: all relevant transactions pre-5 December 2005
transactions),
5
(d)
section 742 (partial exemption where later associated operations fail
conditions),
(e)
section 743(2) (no duplication of charges: choice of persons in relation
to whom income is taken into account).
Chapter 3
10
Transactions in land
Introduction
752
Overview of Chapter
(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.
15
(2)
This Chapter imposes a charge to income tax in some circumstances where
gains of a capital nature are obtained from disposing of land.
753
Meaning of disposing of land
(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—
20
(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,
arrangement or scheme concern—
(a)
the land, or
25
(b)
property deriving its value from the land (see section 772(2)).
(3)
See also—
section 761 (transactions, arrangements, sales and realisations relevant for
this Chapter), and
section 762 (tracing value).
30
754
Priority of other income tax provisions
This Chapter has effect subject to—
(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
35
particular person.