Finance Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
193

(4)
Section 87B (remittance basis) applies in relation to chargeable gains
treated under subsection (2) as accruing as it applies in relation to
chargeable gains treated under section 87 as accruing.”
100
For section 90 substitute—
“90
Sections 87 and 89(2): transfers between settlements
5
(1)
This section applies if—
(a)
section 87 applies or has applied to a settlement (“the
transferor settlement”), and
(b)
the trustees of that settlement transfer all or part of the settled
property to the trustees of another settlement (“the transferee
10
settlement”).
(2)
In this section “the year of transfer” means the tax year in which the
transfer occurs.
(3)
Treat the section 2(2) amount for the transferee settlement for any tax
year (not later than the year of transfer) for which section 87 applies
15
to the transferor settlement as increased by—
(a)
the section 2(2) amount for the transferor settlement for that
year (as reduced under section 87A as it applies in relation to
that settlement for the year of transfer and all earlier tax
years), or
20
(b)
if part only of the settled property is transferred, the relevant
proportion of the amount mentioned in paragraph (a).
(4)
“The relevant proportion” is—
(a)
the market value of the property transferred, divided by
(b)
the market value of the property comprised in the transferor
25
settlement immediately before the transfer.
(5)
Treat the section 2(2) amount for the transferor settlement for any tax
year as reduced by the amount by which the section 2(2) amount for
the transferee settlement for that year is increased under subsection
(3).
30
(6)
If neither section 87 nor section 89(2) would otherwise apply to the
transferee settlement for the year of transfer—
(a)
section 89(2) to (4) apply to the settlement for that year (and
subsequent tax years), and
(b)
for this purpose, references there to the last non-resident tax
35
year are to be read as the year of transfer.
(7)
The increase under subsection (3) has effect for the year of transfer
and subsequent tax years.
(8)
The reduction under subsection (5) has effect for tax years after the
year of transfer.
40
(9)
If the transfer is made for consideration in money or money’s worth,
deduct the amount of that consideration from the amount of the
market value referred to in subsection (4)(a).
(10)
This section does not apply to—
(a)
a transfer to which Schedule 4B applies, or
45

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
194

(b)
any section 2(2) amount that is in a Schedule 4C pool (see
paragraph 1 of Schedule 4C).”
101   (1)
Section 91 (increase in tax payable under section 87 or 89(2)) is amended as
follows.
      (2)
For subsection (1) substitute—
5
“(1)
This section applies if—
(a)
chargeable gains are treated under section 87 or 89(2) as
accruing to a beneficiary by virtue of the matching (under
section 87A) of all or part of a capital payment with the
section 2(2) amount for a tax year (“the relevant tax year”),
10
(b)
the beneficiary is charged to tax by virtue of that matching,
and
(c)
the capital payment was made more than one year after the
end of the relevant tax year.
(1A)
Where part of a capital payment is matched, references in
15
subsections (2) and (3) to the capital payment are to the part
matched.”
      (3)
In subsection (5)(a), for the words from “year” to the end (excluding the
“and”) substitute “tax year immediately after the relevant tax year,”.
      (4)
Omit subsection (8).
20
102
Omit sections 92 to 95 (matching).
103
Omit—
(a)
in FA 1998, paragraph 6(3) and (4) of Schedule 21,
(b)
in FA 2002, paragraph 6 of Schedule 11,
(c)
in FA 2003, section 163(3), and
25
(d)
in FA 2006, paragraphs 34(2)(d) and 36(2)(a) of Schedule 12.
Attribution of gains to beneficiaries: commencement etc
104
The amendments made by paragraphs 95 to 103 have effect for the tax year
2008-09 and subsequent tax years.
105
For the purposes of sections 87 and 87A of TCGA 1992, no account is to be
30
taken of—
(a)
any section 2(2) amount for the tax year 1980-81 or any earlier tax
year,
(b)
any capital payment received before 10 March 1981, or
(c)
any capital payment received on or after that date but before 6 April
35
1984, so far as it represents a chargeable gain which accrued to the
trustees before 6 April 1981.
106
In the application of section 87 of TCGA 1992 for a tax year by virtue of
section 88, no account is to be taken of any capital payment received before
6 April 1991.
40
107
Section 87C of TCGA 1992 does not apply in relation to any capital payment
received before 6 April 2008.
108   (1)
This paragraph applies to a settlement if—

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
195

(a)
section 87 of TCGA 1992 applied to it for the tax year 2007-08 or any
earlier tax year, and
(b)
not all of the trust gains for the tax year 2007-08 (or, if earlier, the last
tax year for which section 87 applied to the settlement) were
attributed under section 87 or 89(2) in the tax year 2007-08 or any
5
earlier tax year to beneficiaries of the settlement.
      (2)
The following steps are to be taken for the purposes of calculating the section
2(2) amount for the settlement for the tax year 2007-08 or any earlier tax year.

Step 1

Calculate (in accordance with section 87 and, where appropriate, section 88)
10
the section 2(2) amount for each tax year (not later than the tax year 2007-08)
for which section 87 applied to the settlement.

Step 2

Find the total amount of chargeable gains treated under section 87 or 89(2)
as accruing to beneficiaries of the settlement in the tax year 2007-08 or any
15
earlier tax year (“the total deemed gains”).

Step 3

If the section 2(2) amount for the earliest tax year for which section 87
applied is less than or equal to the total deemed gains, reduce the section 2(2)
amount for that tax year to nil.
20

Otherwise, reduce that section 2(2) amount by the amount of the total
deemed gains.

Step 4

Reduce the total deemed gains by the amount by which the section 2(2)
amount was reduced under Step 3.
25

Step 5

If the total deemed gains is not nil, start again at Step 3.

For this purpose, read references to the section 2(2) amount for the earliest
tax year for which section 87 applied as references to the section 2(2) amount
for the first tax year for which that section applied which is after the last tax
30
year in relation to which Steps 3 and 4 have been undertaken.
109   (1)
This paragraph applies in relation to a settlement if section 87 of TCGA 1992
applied to it for the tax year 2007-08 or any earlier tax year.
      (2)
If all of a capital payment would (in the tax year 2008-09) have been left out
of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the
35
amount of that capital payment is reduced to nil.
      (3)
If part of a capital payment would (in the tax year 2008-09) have been left out
of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the
amount of that capital payment is reduced by the amount of that part.
      (4)
If—
40
(a)
chargeable gains were treated under section 87 or 89(2) of TCGA
1992 as accruing in the tax year 2007-08 or any earlier tax year to a
beneficiary,
(b)
more than one capital payment that the beneficiary had received was
taken into account for the purposes of determining the amount of
45
chargeable gains treated as accruing to the beneficiary, and
(c)
the amount of those chargeable gains was less than the total amount
of capital payments taken into account,

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
196


for the purposes of this paragraph treat section 87(6) of TCGA 1992 as
originally enacted as having effect in relation to earlier capital payments
before later ones.
110   (1)
This paragraph applies if—
(a)
chargeable gains are treated under section 87 or 89(2) of TCGA 1992
5
as accruing to an individual in the tax year 2008-09 or any
subsequent tax year, and
(b)
the individual is not domiciled in the United Kingdom in that year.
      (2)
The individual is not charged to capital gains tax on the chargeable gains if
and to the extent that they are treated as accruing by reason of—
10
(a)
a capital payment received (or treated as received) by the individual
before 6 April 2008, or
(b)
the matching of any capital payment with the section 2(2) amount for
the tax year 2007-08 or any earlier tax year.
111   (1)
This paragraph applies in relation to a settlement for the tax year 2008-09 or
15
any subsequent tax year (“the relevant tax year”) if—
(a)
an individual who was resident or ordinarily resident, but not
domiciled, in the United Kingdom in the tax year 2007-08 received a
capital payment from the trustees of the settlement on or after 12
March 2008 but before 6 April 2008, and
20
(b)
the individual is resident or ordinarily resident, but not domiciled, in
the United Kingdom in the relevant tax year.
      (2)
For the purposes of sections 87 to 89 of TCGA 1992 as they apply in relation
to the settlement for the relevant tax year, no account is to be taken of the
capital payment.
25
112   (1)
The following provisions apply to a settlement if—
(a)
section 87 applies to the settlement for the tax year 2008-09, and
(b)
the trustees of the settlement have made an election under this sub-
paragraph.
      (2)
An election under sub-paragraph (1) may only be made on or before the first
30
31 January to occur after the end of the first tax year (beginning with the tax
year 2008-09) in which an event within either of the following paragraphs
occurs—
(a)
a capital payment is received (or treated as received) by a beneficiary
of the settlement, and the beneficiary is resident in the United
35
Kingdom in the tax year in which it is received, and
(b)
the trustees transfer part (but not all) of the settled property to the
trustees of another settlement, and section 90 of TCGA 1992 applies
in relation to the transfer.
      (3)
An election under sub-paragraph (1) is irrevocable.
40
      (4)
An election under that sub-paragraph must be made in the way and form
specified by the Commissioners for Her Majesty’s Revenue and Customs.
      (5)
Sub-paragraph (6) applies if—
(a)
by virtue of the matching of a capital payment with the section 2(2)
amount for the settlement for the tax year 2008-09 or any subsequent
45
tax year (“the relevant tax year”), chargeable gains are treated under

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
197

section 87 or 89(2) of TCGA 1992 as accruing to an individual in a tax
year, and
(b)
the individual is resident, but not domiciled, in the United Kingdom
in that year.
      (6)
The individual is not charged to capital gains tax on so much of the
5
chargeable gains as exceeds the relevant proportion of those gains.
      (7)
The relevant proportion is—

where—
A is what would be the section 2(2) amount for the settlement for the
relevant tax year, if immediately before 6 April 2008 every relevant
10
asset had been sold by the trustees (or the company concerned) and
immediately re-acquired by them (or it) at the market value at that
time, and
B is the section 2(2) amount for the settlement for the relevant tax year.
      (8)
For the purposes of sub-paragraph (7) an asset is a “relevant asset” if—
15
(a)
by reason of the asset, a chargeable gain or allowable loss accrues to
the trustees in the relevant tax year, and
(b)
the asset has been comprised in the settlement from the beginning of
6 April 2008 until the time of the event giving rise to the chargeable
gain or allowable loss.
20
      (9)
For those purposes, an asset is also a “relevant asset” if—
(a)
by reason of the asset, chargeable gains are treated under section 13
of TCGA 1992 as accruing to the trustees in the relevant tax year,
(b)
the company to whom the chargeable gains actually accrue has
owned the asset from the beginning of 6 April 2008 until the time of
25
the event giving rise to those chargeable gains, and
(c)
had the company disposed of the asset at any time in the relevant
period, the same part (or a larger part) of the chargeable gains (if any)
accruing on the disposal would have been treated under section 13
of TCGA 1992 as accruing to the trustees.
30
     (10)
In sub-paragraph (9)(c) “the relevant period” means the period beginning at
the beginning of 6 April 2008 and ending immediately before the event
giving rise to the chargeable gains.
113   (1)
This paragraph applies if—
(a)
in the tax year 2008-09 or any subsequent tax year, the trustees of a
35
settlement (“the transferor settlement”) transfer all or part of the
settled property to the trustees of another settlement (“the transferee
settlement”)
(b)
section 90 of TCGA 1992 applies in relation to the transfer,
(c)
the trustees of the transferor settlement have made an election under
40
paragraph 112(1),
(d)
by virtue of the matching of a capital payment with the section 2(2)
amount for the transferee settlement for the tax year 2008-09 or any
subsequent tax year (“the relevant tax year”), chargeable gains are
treated under section 87 or 89(2) of TCGA 1992 as accruing to an
45
individual in a tax year, and

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
198

(e)
the individual is resident, but not domiciled, in the United Kingdom
in that year.
      (2)
The individual is not charged to capital gains tax on so much of the
chargeable gains as exceeds the relevant proportion of those gains.
      (3)
The relevant proportion is—
5

where—
A is what would be the section 2(2) amount for the transferee
settlement for the relevant tax year, if immediately before 6 April
2008 every relevant asset had been sold by the company concerned
and immediately re-acquired by it at the market value at that time,
10
and
B is the section 2(2) amount for the transferee settlement for the relevant
tax year.
      (4)
For the purposes of sub-paragraph (3) an asset is a “relevant asset” if—
(a)
by reason of the asset, chargeable gains are treated under section 13
15
of TCGA 1992 as accruing to the trustees of the transferee settlement
in the relevant tax year,
(b)
the company to whom the chargeable gains actually accrue has
owned the asset from the beginning of 6 April 2008 until the time of
the event giving rise to those chargeable gains,
20
(c)
had the company disposed of the asset at any time in the relevant
period, the same part (or a larger part) of the chargeable gains (if any)
accruing on the disposal would have been treated under section 13
of TCGA 1992 as accruing to—
(i)
the trustees of the transferor settlement (if the disposal had
25
been made before the transfer), or
(ii)
the trustees of the transferee settlement (if it had not).
      (5)
In sub-paragraph (4)(c) “the relevant period” means the period beginning at
the beginning of 6 April 2008 and ending immediately before the event
giving rise to the chargeable gains.
30
Attribution of gains to beneficiaries: cases involving transfers of value
114
TCGA 1992 is amended as follows.
115
In section 85A (transfers of value: attribution of gains to beneficiaries and
treatment of losses), for subsection (3) substitute—
“(3)
When calculating the section 2(2) amount for a settlement for a tax
35
year (within the meaning of section 87), no account is to be taken of
any chargeable gains or allowable losses accruing by virtue of
Schedule 4B.

Nothing in this subsection affects any increase in a section 2(2)
amount by virtue of paragraph 1(3A) or 7B(2)(b) of Schedule 4C.”
40
116
In paragraph 3 of Schedule 4B (transfers of value by trustees linked with
trustee borrowing: settlements), for sub-paragraph (4) substitute—
    “(4)
A settlement is “within section 87” for a tax year if—

Finance Bill
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
199

(a)
section 87 applies to the settlement for that year, or
(b)
chargeable gains would be treated under section 89(2) as
accruing in that year to a beneficiary who received a capital
payment from the trustees of the settlement in that year.”
117
Schedule 4C to TCGA 1992 (transfers of value: attribution of gains to
5
beneficiaries) is amended as follows.
118
In paragraph 1, for sub-paragraphs (2) and (3) substitute—
    “(2)
The transferor settlement is regarded for the purposes of this
Schedule as having a “Schedule 4C pool”.
      (3)
The Schedule 4C pool contains the section 2(2) amounts for the
10
settlement that are outstanding at the end of the tax year in which
the transfer is made (see paragraph 1A).
     (3A)
The section 2(2) amount for that tax year is increased by—
(a)
the amount of Schedule 4B trust gains accruing by virtue of
the original transfer (see paragraphs 3 to 7), and
15
(b)
the total amount of any further Schedule 4B trust gains
accruing by virtue of any further transfers of value to
which that Schedule applies that are made by the trustees
in that tax year.”
119
After that paragraph insert—
20
“Outstanding section 2(2) amounts
1A    (1)
The following steps are to be taken for the purpose of calculating
the section 2(2) amounts for a settlement that are outstanding at
the end of a tax year (“the relevant tax year”).

Step 1
25

Find the section 2(2) amount for the settlement for each tax year
(not later than the relevant tax year) for which section 87 applies
to the settlement, as reduced under section 87A as it applies for the
relevant tax year and earlier tax years.

Step 2
30

This Step applies if, by virtue of the matching of the section 2(2)
amount for the settlement for a tax year (“the applicable year”)
with a capital payment, chargeable gains are treated under section
87 or 89(2) as accruing in the relevant tax year to a beneficiary who
is not chargeable to tax for that year.
35

Increase the section 2(2) amount for the applicable year (found
under Step 1) by the amount of the chargeable gains.
      (2)
For the purposes of this Schedule a beneficiary is “chargeable to
tax” for a tax year if the beneficiary is resident or ordinarily
resident in the United Kingdom in that year.”
40
120
Omit paragraph 7A (and the heading before it).
121
For paragraph 7B substitute—
“7B   (1)
This paragraph applies if the trustees of the transferor settlement
make a further transfer of value to which Schedule 4B applies in a