Finance Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
179

50
Omit sections 833 to 837.
Chargeable gains
51
TCGA 1992 is amended as follows.
52    (1)
Section 3 (annual exempt amount) is amended as follows.
      (2)
After subsection (1) insert—
5
“(1A)
Subsection (1) does not apply to an individual for a tax year if section
809B of ITA 2007 (claim for remittance basis to apply) applies to the
individual for that year.”
      (3)
In subsection (5C)—
(a)
after paragraph (a) insert—
10
“(aa)
if section 16ZB (certain chargeable gains charged on
remittance basis) applies for that year, deducting the
amount of the relevant gains (within the meaning of
that section),” and
(b)
in paragraph (b), after “deducting” insert “(from the amount
15
mentioned in paragraph (a), as reduced under paragraph (aa))”.
53
In section 3A (reporting limits), after subsection (5) insert—
“(5A)
Subsection (1) does not apply to an individual for a tax year if—
(a)
section 809B of ITA 2007 (claim for remittance basis to apply),
or
20
(b)
section 16ZB below (certain chargeable gains charged on
remittance basis),

applies to the individual for that year.”
54
In section 9 (residence etc), omit subsection (2).
55
In section 10A (temporary non-residents), after subsection (9) insert—
25
“(9ZA)
If—
(a)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
applies to the taxpayer for the year of return, and
(b)
the taxpayer is not domiciled in the United Kingdom in that
year,
30

any foreign chargeable gains falling within subsection (2)(a) which
were remitted in an intervening year are treated as remitted in the
year of return.

For this purpose “foreign chargeable gains” has the meaning given
by section 12(4).”
35
56
For section 12 substitute—
“12
Non-UK domiciled individuals to whom remittance basis applies
(1)
This section applies to foreign chargeable gains accruing to an
individual in a tax year (“the foreign chargeable gains”) if—
(a)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
40
applies to the individual for that year, and
(b)
the individual is not domiciled in the United Kingdom in that
year.

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
180

(2)
Chargeable gains are treated as accruing to the individual in any tax
year in which any of the foreign chargeable gains are remitted to the
United Kingdom.
(3)
The amount of chargeable gains treated as accruing is equal to the
full amount of the foreign chargeable gains so remitted in that year.
5
(4)
In this section “foreign chargeable gains” means chargeable gains
accruing from the disposal of an asset which is situated outside the
United Kingdom.
(5)
See sections 809K to 809R of ITA 2007 for the meaning of “remitted
to the United Kingdom” etc.”
10
57
In section 16 (computation of losses), omit subsection (4).
58
After that subsection insert—
“16ZA
Losses: non-UK domiciled individuals
(1)
In this section “the relevant tax year”, in relation to an individual,
means the first tax year for which—
15
(a)
section 809B of ITA 2007 (claim for remittance basis) applies
to the individual, and
(b)
the individual is not domiciled in the United Kingdom.
(2)
An individual may make an election under this section for the
relevant tax year (in which case sections 16ZB and 16ZC have effect
20
in relation to the individual for the relevant tax year and all
subsequent tax years).
(3)
If an individual does not make such an election, foreign losses
accruing to the individual in the relevant tax year or any subsequent
tax year are not allowable losses.
25
(4)
An election under this section is irrevocable.
(5)
In this section “foreign loss” means a loss accruing from the disposal
of an asset situated outside the United Kingdom.
16ZB
Individual who has made election under section 16ZA: foreign
chargeable gains remitted in tax year after tax year in which accrue
30
(1)
This section applies to an individual for a tax year (“the applicable
tax year”) if—
(a)
the individual has made an election under section 16ZA,
(b)
foreign chargeable gains accrued to the individual in or after
the relevant tax year (within the meaning of section 16ZA)
35
but before the applicable tax year, and
(c)
by reason of the remission of any of the foreign chargeable
gains to the United Kingdom, chargeable gains are treated
under section 12 as accruing to the individual in the
applicable tax year (“the relevant gains”).
40
(2)
Section 2(2) or (4) has effect for the applicable tax year as if the
relevant gains had not accrued.

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
181

(3)
The amount on which the individual is charged to capital gains tax
for the applicable tax year is (instead of the amount given by section
2(2) or (4)(b), as reduced under section 3) the sum of—
(a)
the adjusted taxable amount, and
(b)
the amount of the relevant gains.
5
(4)
“The adjusted taxable amount” is—
(a)
if section 3(1) (annual exempt amount) does not apply to the
individual for the applicable tax year, the amount given by
section 2(2) or (4)(b) as it has effect by virtue of subsection (2),
and
10
(b)
otherwise, so much of that amount as exceeds the exempt
amount for the applicable tax year (within the meaning of
section 3).
(5)
In subsection (1) “foreign chargeable gains” has the meaning given
by section 12(4).
15
(6)
For the purposes of subsection (1)(c) foreign chargeable gains are
remitted to the United Kingdom if they are regarded as so remitted
for the purposes of section 12.
16ZC
Individual who has made election under section 16ZA and to whom
remittance basis applies
20
(1)
This section applies to an individual for a tax year if—
(a)
the individual has made an election under section 16ZA for
the tax year or any earlier tax year,
(b)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
applies to the individual for the tax year, and
25
(c)
the individual is not domiciled in the United Kingdom in the
tax year.
(2)
The following steps apply for the purpose of calculating the amount
on which the individual is to be charged to capital gains tax for the
tax year.
30

Step 1

Deduct any relevant allowable losses from the chargeable gains
referred to in subsection (3) in the order in which they appear there
(starting with paragraph (a) of that subsection).

If allowable losses are deductible from the chargeable gains referred
35
to in subsection (3)(b) but are not enough to exhaust them all—
(a)
those chargeable gains are to be ordered according to the day
on which they accrued,
(b)
the losses are to be deducted from those gains in reverse
chronological order (starting with the last chargeable gain to
40
accrue), and
(c)
if allowable losses are deductible from chargeable gains that
accrued on a particular day but are not enough to exhaust all
of the chargeable gains that accrued on that day, the amount
deducted from each of those chargeable gains is the
45
appropriate proportion of the losses.

In paragraph (c) “the appropriate proportion”, in relation to a
chargeable gain, is the amount of that gain divided by the total
amount of the chargeable gains that accrued on the day in question.

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
182


Step 2

Treat the amount referred to in section 2(2) or (4)(a) or 16ZB(3)(a) as
being equal to—
(a)
the amount it would be if there were no relevant allowable
losses, minus
5
(b)
the total amount deducted under Step 1 from chargeable
gains within subsection (3)(a) or (c).
(3)
The chargeable gains are—
(a)
foreign chargeable gains accruing to the individual in the tax
year, to the extent that they are remitted to the United
10
Kingdom in that year,
(b)
foreign chargeable gains accruing to the individual in that
year, to the extent that they are not so remitted in that year,
and
(c)
chargeable gains accruing to the individual in that year (other
15
than foreign chargeable gains).
(4)
Chargeable gains treated as accruing under section 87 or 89(2) (read,
where appropriate, with section 10A) are not within any paragraph
of subsection (3).
(5)
Chargeable gains treated as accruing under section 12 are not within
20
subsection (3)(c).
(6)
For the purposes of subsection (3) foreign chargeable gains are
remitted to the United Kingdom if they are regarded as so remitted
for the purposes of section 12.
(7)
In this section—
25
“relevant allowable losses” means the allowable losses that
section 2(2) provides may be deducted from chargeable gains
accruing to the individual in the tax year, and
“foreign chargeable gains” has the meaning given by section
12(4).
30
16ZD
Section 16ZC: supplementary
(1)
This section applies if section 16ZC applies to an individual for a tax
year.
(2)
Any allowable loss deducted under step 1 of section 16ZC(2) is to be
regarded (for the purposes of section 2(2)(b)) as allowed as a
35
deduction from chargeable gains accruing to the individual in the tax
year.
(3)
If a deduction is made under step 1 of section 16ZC(2) from a foreign
chargeable gain within section 16ZC(3)(b), the amount of the foreign
chargeable gain is reduced by the amount deducted.”
40
Minor and consequential amendments
59
In section 33(2A) of TMA 1970 (error or mistake)—
(a)
omit the “or” at the end of paragraph (a), and

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
183

(b)
at the end of paragraph (b) insert “, or
(c)
an error or mistake consisting of the making of a claim
under section 809B of ITA 2007 (claim for remittance
basis).”
60
ITTOIA 2005 is amended as follows.
5
61
In section 839 (annual payments payable out of relevant foreign income),
omit subsection (6).
62
In section 840 (relief for backdated pensions charged on arising basis), omit
subsection (4) (application of section 837).
63
After that section insert—
10
“840A
Claims under section 840
(1)
A claim under section 840 must be made on or before the fifth
anniversary of the normal self-assessment filing date for the tax year
for which the relief is claimed.
(2)
All adjustments (by way of repayment of tax, assessment or
15
otherwise) are to be made which are necessary to give effect to
section 840.
(3)
Those adjustments may be made at any time, despite anything to the
contrary in the Income Tax Acts.
(4)
A person’s personal representatives may make any claim under
20
section 840 which the person might have made.
(5)
If a person dies—
(a)
any tax paid by the person and repayable because of a claim
under section 840 is to be repaid to the personal
representatives, and
25
(b)
the person’s personal representatives are liable for any
additional tax which arises because of a claim under that
section.
(6)
If subsection (5)(b) applies, the additional tax—
(a)
is to be assessed on the personal representatives, and
30
(b)
is a debt due and payable out of the estate.”
64    (1)
Section 857 (partners to whom the remittance basis may apply) is amended
as follows.
      (2)
In subsection (1), for paragraph (c) substitute—
“(c)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
35
applies to a partner for a tax year.”
      (3)
In subsection (3), omit “for the purposes of this Act (see Part 8)”.
      (4)
Accordingly, in the heading for “may apply” substitute “applies”.
65
In section 878 (definitions), omit subsection (2).
66
In Schedule 2 (transitional provision etc), omit paragraphs 150 and 151.
40
67
In Part 2 of Schedule 4 (index of defined expressions), omit the entry for
“person to whom the remittance basis applies”.

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
184

68
ITA 2007 is amended as follows.
69
In section 2(14) (overview of Act), before paragraph (a) insert—
“(za)
an alternative basis for charge (the remittance basis) for
certain income and gains of certain individuals (Chapter
A1),”.
5
70
In section 30(1) (additional tax), after the entry relating to section 424 of ITA
2007 insert—
“section 809G(4) (claim for remittance basis: charge where
insufficient income or gains nominated),”.
71
In section 34 (personal allowances etc: introduction), after subsection (2)
10
insert—
“(3)
For the effect of section 809B (claim for remittance basis to apply)
applying to an individual for a tax year, see section 809F (no
entitlement to personal allowance or blind person’s allowance).”
72
In section 42 (tax reductions for married couples etc: introduction), after
15
subsection (4) insert—
“(5)
For the effect of section 809B (claim for remittance basis to apply)
applying to an individual for a tax year, see section 809F (no
entitlement to tax reduction).”
73
In section 425(3)(b) (gift aid: calculation of “amount C”), after “7” insert
20
“except insofar as it relates to a liability to income tax under section
809G(4)”.
74
In section 460 (residence etc of claimants for relief for life insurance
payments etc), after subsection (3) insert—
“(4)
For the effect of section 809B (claim for remittance basis to apply)
25
applying to an individual for a tax year, see section 809F (no
entitlement under section 457, 458 or 459).”
75
In consequence of the amendments made by this Part of this Schedule,
omit—
(a)
in ITEPA 2003, paragraph 208 of Schedule 6,
30
(b)
in ITTOIA 2005, paragraph 429 of Schedule 1, and
(c)
in the Commissioners for Revenue and Customs Act 2005 (c. 11),
paragraphs 102(3)(b) to (d) and 104 of Schedule 4.
Commencement
76
The amendments made by paragraphs 3(3), 4(3), 5(2), 22, 31 and 32 have
35
effect in relation to employment-related securities and employment-related
securities options where the date of the acquisition is on or after 6 April 2008.
77
The other amendments made by this Part of this Schedule have effect for the
tax year 2008-09 and subsequent tax years.
Transitional provision
40
78    (1)
This paragraph applies in relation to an individual’s general earnings for the
tax year 2007-08 or any earlier tax year (“the relevant tax year”) if the
individual—

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
185

(a)
was UK resident in that year, but
(b)
was not domiciled in the United Kingdom, or was not ordinarily UK
resident, in that year.
      (2)
Section 22 or 26 of ITEPA 2003 (as amended by this Part of this Schedule)
applies in relation to the general earnings as if—
5
(a)
section 809B of ITA 2007 (claim for remittance basis to apply) applied
to the individual for the relevant tax year, and
(b)
section 22(7) or 26(6) of ITEPA 2003 were omitted.
      (3)
In relation to the general earnings, the definition of “foreign employer” in
section 721(1) of ITEPA 2003 has effect as if at the end there were inserted
10
“and not resident in the Republic of Ireland”.
79    (1)
This paragraph applies to an individual’s relevant foreign income for the tax
year 2007-08 or any earlier tax year (“the relevant tax year”) if—
(a)
the individual made a claim under section 831 of ITTOIA 2005 for the
relevant tax year, or
15
(b)
section 65(5) of ICTA (or any earlier superseded enactment
corresponding to that provision) applied in relation to the individual
for the relevant tax year.
      (2)
Section 832 of ITTOIA 2005 (as amended by this Part of this Schedule)
applies in relation to the relevant foreign income as if section 809B of ITA
20
2007 (claim for remittance basis to apply) applied to the individual for the
relevant tax year.
      (3)
But nothing in section 832 of ITTOIA 2005 applies in relation to any of the
relevant foreign income that arose in the Republic of Ireland.
      (4)
Nothing in section 832A of that Act applies in relation to anything remitted
25
to the United Kingdom in the tax year 2007-08 or any earlier tax year.
80    (1)
This paragraph applies if section 12 of TCGA 1992 (or any corresponding
superseded enactment) applied in relation to a gain accruing to an
individual in the tax year 2007-08 or any earlier tax year (“the relevant tax
year”).
30
      (2)
Section 12 of TCGA 1992 (as amended by this Part of this Schedule) applies
in relation to that gain as if section 809B of ITA 2007 (claim for remittance
basis to apply) applied to the individual for the relevant tax year.
      (3)
Nothing in section 10A of TCGA 1992 applies in relation to any part of the
gain remitted to the United Kingdom in the tax year 2007-08 or any earlier
35
tax year.
81    (1)
In section 809D(3)(b) of ITA 2007, the reference to a tax year for which any
of sections 809B to 809D applies to an individual includes a tax year (not
later than the tax year 2007-08) in which the individual—
(a)
was UK resident, but
40
(b)
was not domiciled in the United Kingdom or was not ordinarily UK
resident.
      (2)
In relation to such a tax year, the reference there to the individual’s foreign
income and gains includes the individual’s relevant foreign income if (and
only if)—
45