Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Schedule 7 — Remittance basis
Part 1 — Main provisions
186

(a)
the individual made a claim under section 831 of ITTOIA 2005 for the
year, or
(b)
section 65(5) of ICTA (or any earlier superseded enactment
corresponding to that provision) applied in relation to the individual
for the year.
5
82    (1)
Section 809K of ITA 2007 (meaning of “remitted to the United Kingdom”)
has effect subject to this paragraph.
      (2)
In either of the cases set out in sub-paragraph (3) or (4), an individual’s
relevant foreign income is not to be treated as remitted to the United
Kingdom by virtue of property of a relevant person being brought to, or
10
received or used in, the United Kingdom in circumstances in which section
809L(2)(a) applies.
      (3)
The first case is where the property was acquired by the relevant person
before 12 March 2008.
      (4)
The second case is where the property—
15
(a)
was acquired by the relevant person (“the owner”)—
(i)
on or after 12 March 2008, but
(ii)
before 6 April 2008, and
(b)
has been brought to, or received or used in, the United Kingdom by
or for the benefit of any relevant person at any time—
20
(i)
after its acquisition by the owner, and
(ii)
before 6 April 2008.
      (5)
Subject to sub-paragraphs (2) to (4), in relation to an individual’s income and
chargeable gains for the tax year 2007-08 or any earlier tax year, section 809L
has effect as if the references to a relevant person were to the individual.
25
83
Section 809M of ITA 2007 (section 809L: gift recipients, qualifying property
and enjoyment) has effect in relation to an individual’s income and
chargeable gains for the tax year 2007-08 or any earlier tax year as if—
(a)
the reference in subsection (2) to a relevant person were to the
individual,
30
(b)
subsections (3) and (4) were omitted, and
(c)
the references in subsection (9) to a relevant person, all relevant
persons, or relevant persons were to the individual.
84
Section 809N of ITA 2007 (section 809L: dealings where there is a connected
operation) has effect in relation to an individual’s income and chargeable
35
gains for the tax year 2007-08 or any earlier tax year as if—
(a)
subsection (2) were omitted, and
(b)
the references in subsections (4) and (6) to a relevant person, all
relevant persons, or relevant persons were to the individual.
85
Sections 809P and 809Q of ITA 2007 (transfers from mixed funds) do not
40
apply for the purposes of determining whether income or chargeable gains
for the tax year 2007-08 or any earlier tax year are remitted to the United
Kingdom (or the amount of any such income or chargeable gains so
remitted).
86    (1)
This paragraph applies if—
45
(a)
before 12 March 2008, money was lent to an individual outside the
United Kingdom,

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
187

(b)
the loan was made for the purpose of enabling the individual to
acquire an interest in residential property in the United Kingdom
(and for no other purpose), and
(c)
before 6 April 2008—
(i)
the money was received in the United Kingdom,
5
(ii)
the individual used the money to acquire an interest in
residential property in the United Kingdom, and
(iii)
repayment of the debt for the money (“the debt”) was secured
on that interest.
      (2)
Relevant foreign income of the individual used outside the United Kingdom
10
before 6 April 2028 to pay interest on the debt is treated as not remitted to
the United Kingdom.
      (3)
If, at any time on or after 12 March 2008—
(a)
any term upon which the loan was made is varied or waived,
(b)
the debt ceases to be secured on the interest referred to in sub-
15
paragraph (1)(c), or
(c)
any other debt is secured on that interest,

sub-paragraph (2) does not apply in relation to relevant foreign income used
as mentioned there after that time.
      (4)
In this paragraph “residential property” has the same meaning as in Part 4
20
of FA 2003 (see section 116 of that Act).
Part 2
Non-resident companies and trusts etc
Offshore income gains
87
In section 761 of ICTA (charge to income tax or corporation tax of offshore
25
income gain), for subsection (5) substitute—
“(5)
Subsections (1)(b) and (1A) are subject to section 762ZA (income
treated as arising: non-UK domiciled individuals to whom
remittance basis applies).”
88    (1)
Section 762 of that Act (offshore income gains accruing to persons resident
30
or domiciled abroad) is amended as follows.
      (2)
For subsections (2) to (4) substitute—
“(2)
Subsections (3) to (4A) apply if—
(a)
offshore income gains accrue in a tax year (“the relevant tax
year”) to the trustees of a settlement, and
35
(b)
section 87 of the 1992 Act (non-UK resident settlement:
attribution of gains to beneficiaries) applies to the settlement
for the relevant tax year or any earlier tax year.
(3)
For the relevant tax year, sections 87 to 87C (and sections 96 and 97)
of the 1992 Act apply to the settlement in relation to the offshore
40
income gains as if—
(a)
references to chargeable gains were to offshore income gains,

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
188

(b)
the section 2(2) amount for the relevant tax year were the
amount of offshore income gains accruing to the trustees in
that year, and
(c)
the section 2(2) amount for any earlier tax year were nil.
(4)
For the relevant tax year, sections 87 and 87A of the 1992 Act have
5
effect by virtue of subsection (3) before they have effect otherwise
than by virtue of that subsection.
(4A)
If—
(a)
by virtue of subsection (5), Chapter 2 of Part 13 of ITA 2007
(transfer of assets abroad) applies in relation to the offshore
10
income gains (or part of them), and
(b)
by virtue of any of sections 737 to 742 of that Act, no liability
to income tax arises under that Chapter in respect of those
gains (or part of them),

subsections (3) and (4) apply in relation to the gains (or the part
15
referred to in paragraph (b)) for tax years after the relevant tax year
as they apply in relation to the gains for the relevant tax year.”
      (3)
In subsection (6), for “subsection (2) above” substitute “subsection (3)”.
89
After that section insert—
“762ZA
Income treated as arising under section 761(1): remittance basis
20
(1)
This section applies to income treated as arising under section 761(1)
to an individual in a tax year if—
(a)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
applies to the individual for that year, and
(b)
the individual is not domiciled in the United Kingdom in that
25
year.
(2)
If any of the income is remitted to the United Kingdom in a tax year,
tax is charged on the full amount of the income so remitted in that
year.
(3)
Sections 809K to 809Q of ITA 2007 (meaning of “remitted to the
30
United Kingdom” etc) apply in relation to the income as if it were the
individual’s relevant foreign income.
(4)
For the purposes of those sections—
(a)
treat any consideration obtained on the disposal of the asset
as deriving from the income, and
35
(b)
unless the consideration so obtained is of an amount equal to
the market value of the asset, treat the asset as deriving from
the income.
(5)
In subsection (4)—
(a)
“the asset” means the asset the disposal of which causes the
40
income to be treated as arising, and
(b)
“the disposal” means the disposal mentioned in paragraph
(a).”
90
In Schedule 10 to TCGA 1992 (consequential amendments), omit paragraph
14(47)(c) and (48)(b) to (d).
45

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
189

91
The amendments made by paragraphs 87 to 90 have effect for the tax year
2008-09 and subsequent tax years.
Attribution of gains to members of non-resident companies
92
In section 13(2) of TCGA 1992 (attribution of gains to members of non-
resident companies), for the words from “, who, if” to “and who” substitute
5
“and”.
93
After section 14 of that Act insert—
“14A
Section 13: non-UK domiciled individuals
(1)
This section applies if—
(a)
by virtue of section 13, part of a chargeable gain that accrues
10
to a company on the disposal of an asset is treated as accruing
to an individual in a tax year, and
(b)
the individual is not domiciled in the United Kingdom in that
year.
(2)
The part of the chargeable gain treated as accruing to the individual
15
(“the deemed chargeable gain”) is a foreign chargeable gain within
the meaning of section 12 if (and only if) the asset is situated outside
the United Kingdom.
(3)
For the purposes of sections 809K to 809Q of ITA 2007 (meaning of
“remitted to the United Kingdom” etc)—
20
(a)
treat any consideration obtained by the company on the
disposal of the asset as deriving from the deemed chargeable
gain, and
(b)
unless the consideration so obtained is of an amount equal to
the market value of the asset, treat the asset as deriving from
25
the deemed chargeable gain.
(4)
If—
(a)
the deemed chargeable gain is a foreign chargeable gain
(within the meaning of section 12),
(b)
section 809B, 809C or 809D of ITA 2007 (remittance basis)
30
applies to the individual for the year mentioned in subsection
(1), and
(c)
any of the deemed chargeable gain is remitted to the United
Kingdom in a tax year after that year,

the chargeable gain treated under section 12(2) as accruing may not
35
be reduced or extinguished under section 13(8).”
94
The amendments made by paragraphs 92 and 93 have effect in relation to
chargeable gains accruing on or after 6 April 2008.
Attribution of gains to beneficiaries
95
TCGA 1992 is amended as follows.
40
96
In section 85(11) (disposal of interests in non-resident settlements), for the
words from “there would” to the end substitute “chargeable gains would be
treated under section 89(2) or paragraph 8 of Schedule 4C as accruing in the

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
190

following year of assessment to a beneficiary who received a capital
payment from the trustees of the settlement in that year.”
97
For section 87 substitute—
“87
Non-UK resident settlements: attribution of gains to beneficiaries
(1)
This section applies to a settlement for a tax year (“the relevant tax
5
year”) if the trustees are neither resident nor ordinarily resident in
the United Kingdom in that year.
(2)
Chargeable gains are treated as accruing in the relevant tax year to a
beneficiary of the settlement who has received a capital payment
from the trustees in the relevant tax year or any earlier tax year if all
10
or part of the capital payment is matched (under section 87A as it
applies for the relevant tax year) with the section 2(2) amount for the
relevant tax year or any earlier tax year.
(3)
The amount of chargeable gains treated as accruing is equal to—
(a)
the amount of the capital payment, or
15
(b)
if only part of the capital payment is matched, the amount of
that part.
(4)
The section 2(2) amount for a tax year is—
(a)
the amount upon which the trustees would be chargeable to
tax under section 2(2) for that year if they were resident and
20
ordinarily resident in the United Kingdom in that year, or
(b)
if section 86 applies to the settlement for that year, the
amount mentioned in paragraph (a) minus the total amount
of chargeable gains treated under that section as accruing in
that year.
25
87A
Section 87: matching
(1)
This section supplements section 87.
(2)
The following steps are to be taken for the purposes of matching
capital payments with section 2(2) amounts.

Step 1
30

Find the section 2(2) amount for the relevant tax year.

Step 2

Find the total amount of capital payments received by the
beneficiaries from the trustees in the relevant tax year.

Step 3
35

The section 2(2) amount for the relevant tax year is matched with—
(a)
if the total amount of capital payments received in the
relevant tax year does not exceed the section 2(2) amount for
the relevant tax year, each capital payment so received, and
(b)
otherwise, the relevant proportion of each of those capital
40
payments.

“The relevant proportion” is the section 2(2) amount for the relevant
tax year divided by the total amount of capital payments received in
the relevant tax year.

Step 4
45

If paragraph (a) of Step 3 applies—

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
191

(a)
reduce the section 2(2) amount for the relevant tax year by the
total amount of capital payments referred to there, and
(b)
reduce the amount of those capital payments to nil.

If paragraph (b) of that Step applies—
(a)
reduce the section 2(2) amount for the relevant tax year to nil,
5
and
(b)
reduce the amount of each of the capital payments referred to
there by the relevant proportion of that capital payment.

Step 5

Start again at Step 1 (unless subsection (3) applies).
10

If the section 2(2) amount for the relevant tax year (as reduced under
Step 4) is not nil, read references to capital payments received in the
relevant tax year as references to capital payments received in the
latest tax year which—
(a)
is before the last tax year for which Steps 1 to 4 have been
15
undertaken, and
(b)
is a tax year in which capital payments (the amounts of which
have not been reduced to nil) were received by beneficiaries.

If the section 2(2) amount for the relevant tax year (as so reduced) is
nil, read references to the section 2(2) amount for the relevant tax
20
year as the section 2(2) amount for the latest tax year which—
(a)
is before the last tax year for which Steps 1 to 4 have been
undertaken,
(b)
is a tax year to which section 87 applies to the settlement, and
(c)
is a tax year for which the section 2(2) amount is not nil.
25
(3)
This subsection applies if—
(a)
all of the capital payments received by beneficiaries from the
trustees in the relevant tax year or any earlier tax year have
been reduced to nil, or
(b)
the section 2(2) amounts for the relevant tax year and all
30
earlier tax years to which section 87 applies to the settlement
have been reduced to nil.
(4)
The effect of any reduction under Step 4 of subsection (2) by virtue of
section 87 applying to a settlement for a tax year is to be taken into
account in the application of this section by virtue of section 87
35
applying to the settlement for any subsequent tax year.
87B
Section 87: remittance basis
(1)
This section applies in relation to chargeable gains treated under
section 87 as accruing to an individual.
(2)
The chargeable gains are foreign chargeable gains within the
40
meaning of section 12 (non-UK domiciled beneficiaries to whom
remittance basis applies).
(3)
For the purposes of sections 809K to 809Q of ITA 2007 (meaning of
“remitted to the United Kingdom” etc), treat relevant property or
benefits as deriving from the chargeable gains.
45
(4)
For the purposes of subsection (3) property or a benefit is “relevant”
if the capital payment by reason of which the chargeable gains are
treated as accruing consists of—

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
192

(a)
the payment or transfer of the property or its becoming
property to which section 60 applies, or
(b)
the conferring of the benefit.
87C
Sections 87 and 87A: disregard of certain capital payments
(1)
For the purposes of sections 87 and 87A as they apply in relation to a
5
settlement, no account is to be taken of a capital payment (or a part
of a capital payment) within subsection (2).
(2)
A capital payment is within this subsection if (and to the extent that)
it is received (or treated as received) in a tax year from the trustees of
the settlement by a company that—
10
(a)
is not resident in the United Kingdom in that year, and
(b)
would be a close company if it were resident in the United
Kingdom,

(and is not treated under any of subsections (3) to (5) of section 96 as
received by another person).”
15
98    (1)
Section 88 (gains of dual resident settlements) is amended as follows.
      (2)
For subsection (2) substitute—
“(2)
The section 2(2) amount for a tax year for which section 87 applies by
virtue of this section is what it would be if the amount mentioned in
section 87(4)(a) were the assumed chargeable amount.”
20
      (3)
Omit subsection (7).
99    (1)
Section 89 (migrant settlements) is amended as follows.
      (2)
In subsection (1), for “section 87 if” substitute “sections 87 and 87A if”.
      (3)
For subsections (2) and (3) substitute—
“(1A)
Subsection (2) applies to a settlement if—
25
(a)
a non-resident period is succeeded by a resident period, and
(b)
in relation to the last tax year in the non-resident period (“the
last non-resident tax year”), section 87A(3) applied by virtue
of paragraph (a) of that provision (exhaustion of capital
payments).
30
(2)
Chargeable gains are treated as accruing in a tax year (in the resident
period) to a beneficiary of the settlement who receives a capital
payment from the trustees in that year if all or part of the capital
payment is matched (under section 87A as it applies for that year)
with the section 2(2) amount for the last non-resident tax year or any
35
earlier tax year.
(3)
Section 87(3) and (4) and sections 87A to 87C apply for the purposes
of subsection (2) as if—
(a)
the relevant tax year were the tax year mentioned in
subsection (2),
40
(b)
the section 2(2) amount for any tax year after the last non-
resident tax year were nil, and
(c)
references in section 87A(4) to section 87 included references
to section 89(2).