Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
172

(3)
An amount equal to—

is an amount of “taxable specific income” from the employment for
the tax year mentioned in subsection (1)(a).
(4)
In subsection (3)—
(a)
SI is the amount of the securities income, and
5
(b)
FSI is the amount of the securities income that is “foreign”
(see section 41C).
(5)
The full amount of any of the foreign securities income which is
remitted to the United Kingdom in a tax year is an amount of
“taxable specific income” from the employment for that year.
10
(6)
Subsection (5) applies whether or not the employment is held when
the earnings are remitted.
(7)
For the purposes of sections 809K to 809Q of ITA 2007 (meaning of
“remitted to the United Kingdom” etc)—
(a)
in a case where the chargeable event is the disposal of the
15
relevant securities or securities option—
(i)
treat any consideration for the disposal as deriving
from the foreign securities income, and
(ii)
if the individual did not receive consideration of an
amount equal to the market value of the relevant
20
securities or securities option, treat the relevant
securities or securities option as deriving from the
foreign securities income, and
(b)
in any other case, treat the relevant securities or securities
option as deriving from the foreign securities income.
25
(8)
In this section and section 41B—
“the chargeable event” means the event giving rise to the
securities income, and
“the relevant securities” or “the relevant securities option”
means the employment-related securities or employment-
30
related securities option by virtue of which the amount
mentioned in subsection (1)(a) counts as employment
income.
41B
Section 41A: the relevant period
(1)
“The relevant period” is to be determined as follows.
35
(2)
In the case of an amount that counts as employment income by virtue
of Chapter 2 (restricted securities) or Chapter 3 (convertible
securities), the relevant period—
(a)
begins with the day of the acquisition, and
(b)
ends with the day of the chargeable event.
40
(3)
In the case of an amount that counts as employment income by virtue
of section 446U (securities acquired for less than market value:
discharge of notional loan)—

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
173

(a)
if the relevant securities were acquired by virtue of the
exercise of an employment-related securities option (“the
option”), the relevant period—
(i)
begins with the day of the acquisition of the option,
and
5
(ii)
ends with the day of the chargeable event or, if earlier,
the day the option vests, and
(b)
otherwise, the year beginning with the day on which the
notional loan (within the meaning of Chapter 3C) is treated as
made.
10
(4)
In the case of an amount that counts as employment income by virtue
of—
(a)
Chapter 3D (securities disposed of for more than market
value), or
(b)
Chapter 4 (post-acquisition benefits from securities),
15

the relevant period is such period as is just and reasonable.
(5)
In the case of an amount that counts as employment income by virtue
of Chapter 5 (employment-related securities option), the relevant
period—
(a)
begins with the day of the acquisition, and
20
(b)
ends with the day of the chargeable event or, if earlier, the
day the relevant securities option vests.
(6)
In this section “the acquisition” has the same meaning as in Chapters
2 to 4 or Chapter 5 (see section 421B or 471).
(7)
References in this section to the vesting of an option are to the time
25
when it is first capable of being exercised.
(8)
References in this section to a Chapter are to a Chapter of Part 7.
41C
Section 41A: foreign securities income
(1)
The extent to which the securities income is “foreign” is to be
determined as follows.
30
(2)
Treat an equal amount of the securities income as accruing on each
day of the relevant period.
(3)
If any part of the relevant period is within a tax year to which
subsection (4) applies, the securities income treated as accruing in
that part of the relevant period is “foreign”.
35

This is subject to section 41D (limit where duties of associated
employment performed in UK).
(4)
This subsection applies to a tax year if—
(a)
section 809B, 809C or 809D of ITA 2007 applies to the
individual for the year,
40
(b)
the individual is ordinarily UK resident in the year,
(c)
the employment is with a foreign employer, and
(d)
the duties of the employment are performed wholly outside
the United Kingdom.
(5)
If any part of the relevant period is within a tax year to which
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subsection (6) applies—

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
174

(a)
if the duties of the employment are performed wholly
outside the United Kingdom, the securities income treated as
accruing in that part of the relevant period is “foreign”, and
(b)
if some but not all of those duties are performed outside the
United Kingdom—
5
(i)
the securities income mentioned in paragraph (a) is to
be apportioned (on a just and reasonable basis)
between duties performed in the United Kingdom
and duties performed outside the United Kingdom,
and
10
(ii)
the income apportioned in respect of duties
performed outside the United Kingdom is “foreign”.
(6)
This subsection applies for a tax year if—
(a)
section 809B, 809C or 809D of ITA 2007 applies to the
individual for the year,
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(b)
the individual is not ordinarily UK resident in the year, and
(c)
some or all of the duties of the employment are performed
outside the United Kingdom.
(7)
If the individual is not resident in the United Kingdom in a tax year,
for the purposes of this section treat section 809B of ITA 2007 as
20
applying to the individual for that year.
41D
Limit on foreign securities income where duties of associated
employment performed in UK
(1)
This section imposes a limit on the extent to which section 41C(3)
applies in relation to a period when—
25
(a)
the individual holds associated employments as well as the
employment in relation to which section 41C(4) applies, and
(b)
the duties of the associated employments are not performed
wholly outside the United Kingdom.
(2)
The amount of the securities income for the period that is to be
30
regarded as “foreign” is limited to such amount is as just and
reasonable, having regard to—
(a)
the earnings for the period from all the employments
mentioned in subsection (1)(a),
(b)
the proportion of those earnings that are general earnings to
35
which section 22 applies (chargeable overseas earnings),
(c)
the nature of and time devoted to the duties performed
outside the United Kingdom, and those performed in the
United Kingdom, in the period, and
(d)
all other relevant circumstances.
40
(3)
In this section “associated employments” means employments with
the same employer or with associated employers.
(4)
Section 24(5) and (6) (meaning of “associated employer”) apply for
the purposes of this section.”
23
Omit Chapter 6 of Part 2 (disputes as to domicile or ordinary residence).
45
24
In section 225 (payments for restrictive undertakings), for subsections (6)

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
175

and (7) substitute—
“(6)
This section applies only if—
(a)
section 15 applies to any general earnings from the
employment, and would apply even if the individual made a
claim under section 809B of ITA 2007 (claim for remittance
5
basis) for the tax year mentioned in subsection (3), or
(b)
section 27 (UK-based earnings of non-UK resident employee)
applies to any general earnings from the employment.”
25
In section 271(2) (limited exemption of removal benefits and expenses:
general)—
10
(a)
in paragraph (a), for the words from “employee” to “UK” substitute
“remittance basis applies and employee ordinarily UK resident”, and
(b)
in paragraph (b), for the words from “employee” to “UK” substitute
“remittance basis applies and employee not ordinarily UK resident”.
26
In section 335(4) (application of deductions provisions), omit “, 21, 25”.
15
27    (1)
Section 370 (travel costs and expenses where duties performed abroad) is
amended as follows.
      (2)
In subsection (1), for the words from “taxable” to “UK)” substitute “relevant
taxable earnings”.
      (3)
After subsection (5) insert—
20
“(6)
In this section “relevant taxable earnings” means general earnings for
a tax year in which the employee is ordinarily UK resident that—
(a)
are taxable earnings under section 15, and
(b)
would be taxable earnings under section 15 even if the
employee made a claim under section 809B of ITA 2007
25
(claim for remittance basis) for that year.”
28    (1)
Section 371 (travel costs and expenses where duties performed abroad:
spouse’s travel etc) is amended as follows.
      (2)
In subsection (1), for the words from “taxable” to “UK)” substitute “relevant
taxable earnings”.
30
      (3)
After subsection (7) insert—
“(8)
In this section “relevant taxable earnings” has the meaning given by
section 370(6).”
29    (1)
Section 378 (deduction from seafarer’s earnings: eligibility) is amended as
follows.
35
      (2)
In subsection (1)(a), for the words from “taxable” to the end substitute
“relevant taxable earnings,”.
      (3)
After subsection (4) insert—
“(5)
In this section “relevant taxable earnings” means general earnings for
a tax year in which the employee is ordinarily UK resident that—
40
(a)
are taxable earnings under section 15, and
(b)
would be taxable earnings under section 15 even if the
employee made a claim under section 809B of ITA 2007
(claim for remittance basis) for that year.”

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
176

30    (1)
Section 413 (exception in certain cases of foreign service) is amended as
follows.
      (2)
In subsection (3), for paragraph (a) substitute—
“(a)
any earnings from the employment would not be relevant
earnings, or”
5
      (3)
After that subsection insert—
“(3A)
In subsection (3)(a) “relevant earnings” means—
(a)
for service in or after the tax year 2008-09, earnings—
(i)
which are for a tax year in which the employee is
ordinarily UK resident,
10
(ii)
to which section 15 applies, and
(iii)
to which that section would apply, even if the
employee made a claim under section 809B of ITA
2007 (claim for remittance basis) for that year, and
(b)
for service before the tax year 2008-09, general earnings to
15
which section 15 or 21 as originally enacted applies.”
31
In section 421E(1) (income relating to securities: exclusions), for the words
from “or 21” to the end substitute “, 22 or 26 applies (earnings for year when
employee UK resident).”
32
In section 474(1) (securities options: exclusions), for the words from “or 21”
20
to the end substitute “, 22 or 26 applies (earnings for year when employee
UK resident).”
33
In section 540(2) (EMI: taxable benefits), for the words from “or 21” to the
end substitute “applies (earnings for year when employee UK resident).”
34
In section 690 (PAYE: employee non-UK resident etc), after subsection (2)
25
insert—
“(2A)
For the purposes of subsection (2) as it applies in relation to an
employee who is UK resident but not ordinarily UK resident in a tax
year, the officer may treat section 809B of ITA 2007 (remittance basis)
as applying to the employee for that year, even if no claim under that
30
section has been made.”
35
In section 721(1) (other definitions), for the definition of “foreign employer”
substitute—
““foreign employer” means an individual, partnership or body
of persons resident outside, and not resident in, the United
35
Kingdom,”.
36
In Schedule 1 (index of defined expressions), omit the entries relating to—
(a)
receipt of money earnings (in Chapter 5 of Part 2), and
(b)
receipt of non-money earnings (in Chapter 5 of Part 2).
37
In paragraph 8(2) of Schedule 2 (approved share incentive plans: all-
40
employee nature of plan), for the words from “or 21” to the end substitute
“applies (earnings for year when employee UK resident).”
38
In paragraph 6(2)(c) of Schedule 3 (approved SAYE option schemes: all-
employee nature of scheme), for the words from “or 21” to “UK)” substitute
“applies (earnings for year when employee UK resident)”.
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Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
177

39
In paragraph 27(2) of Schedule 5 (enterprise management incentives:
meaning of “working time”)—
(a)
in paragraph (a), for the words from “or 21” to “Kingdom)”
substitute “applies (earnings for year when employee UK resident)”,
and
5
(b)
in paragraph (b), for the words from “resident and” to the end
substitute “UK resident (and none of sections 809B to 809D of ITA
2007 (remittance basis) applied to the employee).”
40
In Schedule 7 (transitionals and savings), omit paragraphs 9 to 12.
Relevant foreign income
10
41
In section 575 of ITEPA 2003 (foreign pensions: taxable pension income),
omit subsection (4).
42
ITTOIA 2005 is amended as follows.
43
In section 260(1) (overview of Part 3)—
(a)
at the end of paragraph (d) insert “and”, and
15
(b)
omit paragraph (f) (and the “and” before it).
44
In section 269 (territorial scope of charge to tax), omit subsections (3) and (4).
45
Omit Chapter 11 of Part 3 (overseas property income).
46
In section 829 (overview of Part 8), for paragraph (a) substitute—
“(a)
the charging of relevant foreign income of a person to whom
20
section 809B, 809C or 809D of ITA 2007 applies (remittance
basis),”.
47    (1)
Section 830 (meaning of “relevant foreign income”) is amended as follows.
      (2)
In subsection (1), for the words from “which” to the end substitute “which—
(a)
arises from a source outside the United Kingdom, and
25
(b)
is chargeable under any of the provisions specified in
subsection (2) (or would be so chargeable if section 832 did
not apply to it).”
      (3)
In subsection (2), omit paragraph (d).
48
Omit section 831 (claims for relevant foreign income to be charged on
30
remittance basis).
49
For section 832 substitute—
“832
Relevant foreign income charged on remittance basis
(1)
This section applies to an individual’s relevant foreign income for a
tax year (“the relevant foreign income”) if section 809B, 809C or 809D
35
of ITA 2007 (remittance basis) applies to the individual for that year.
(2)
For any tax year in which—
(a)
the individual is UK resident, and
(b)
any of the relevant foreign income is remitted to the United
Kingdom,
40

income tax is charged on the full amount of the relevant foreign
income so remitted in that year.

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
178

(3)
Subsection (2) applies whether or not the source of the income exists
when the income is remitted.
(4)
See sections 809K to 809Q of ITA 2007 for the meaning of “remitted
to the United Kingdom” etc.
832A
Section 832: temporary non-residents
5
(1)
This section applies if—
(a)
an individual satisfies the residence requirements for any tax
year (“the year of return”),
(b)
the individual did not satisfy those requirements for one or
more tax years immediately before the year of return but did
10
satisfy those requirements for an earlier tax year,
(c)
there are fewer than 5 tax years between—
(i)
the last tax year before the year of return for which the
individual satisfied those requirements (“the year of
departure”), and
15
(ii)
the year of return, and
(d)
the individual satisfied those requirements for at least 4 out
of the 7 tax years immediately before the year of departure.
(2)
Treat any of the individual’s relevant foreign income within
subsection (3) which is remitted to the United Kingdom after the year
20
of departure and before the year of return as remitted to the United
Kingdom in the year of return.
(3)
Relevant foreign income is within this subsection if—
(a)
it is for the year of departure or any earlier tax year, and
(b)
section 832 applies to it.
25
(4)
For the purposes of subsection (1) an individual “satisfies the
residence requirements” for a tax year if—
(a)
at any time in that year, the individual is UK resident and not
Treaty non-resident, or
(b)
the individual is ordinarily UK resident, and is not Treaty
30
non-resident, for that year.
(5)
For the purposes of subsection (4) an individual is “Treaty non-
resident” at any time if, at that time, he is regarded as resident in a
territory outside the United Kingdom for the purposes of double
taxation relief arrangements having effect at that time.
35
(6)
In subsection (5) “double taxation relief arrangements” means
arrangements specified in an Order in Council making any such
provisions as are referred to in section 788 of ICTA.
832B
Section 832: deductions from remitted income
(1)
The only case in which deductions are allowed from the income
40
mentioned in section 832(2) is where the income is from a trade,
profession or vocation carried on outside the United Kingdom.
(2)
In that case the same deductions are allowed as are allowed under
the Income Tax Acts where the trade, profession or vocation is
carried on in the United Kingdom.”
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