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

200

 

tax year (“the year of the transfer”) after the tax year mentioned in

paragraph 1(3).

      (2)  

If the settlement has a Schedule 4C pool at the beginning of the

year of the transfer—

(a)   

the section 2(2) amounts in the Schedule 4C pool are

5

increased by the section 2(2) amounts for the settlement

that are outstanding at the end of the year of the transfer,

and

(b)   

the section 2(2) amount in the pool for the year of transfer

is increased (or further increased) by the amount of

10

Schedule 4B trust gains accruing by virtue of the further

transfer.

      (3)  

If the settlement does not have a Schedule 4C pool at the beginning

of the year of the transfer, this Schedule applies in relation to the

further transfer as it applied in relation to the original transfer.

15

      (4)  

For the purposes of this paragraph a settlement has a Schedule 4C

pool until the end of the tax year in which all section 2(2) amounts

in the pool have been reduced to nil.”

122        

For paragraph 8 substitute—

“8    (1)  

Chargeable gains are treated as accruing in a tax year (“the

20

relevant tax year”) to a beneficiary who has received a capital

payment from the trustees of a relevant settlement in the relevant

tax year or any earlier tax year if all 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 in the Schedule 4C pool for the

25

relevant tax year or any earlier tax year.

      (2)  

The amount of chargeable gains treated as accruing is equal to—

(a)   

the amount of the capital payment, or

(b)   

if only part of the capital payment is matched, the amount

of that part.

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      (3)  

Section 87A applies for a tax year for the purposes of matching

capital payments received from the trustees of a relevant

settlement with section 2(2) amounts in the Schedule 4C pool as

if—

(a)   

references to section 2(2) amounts were to section 2(2)

35

amounts in the Schedule 4C pool,

(b)   

references to a capital payment received from the trustees

by a beneficiary were to a capital payment received from

the trustees of a relevant settlement by a beneficiary who is

chargeable to tax for that year,

40

(c)   

in Step 5 of section 87A(2), in the third sentence paragraph

(b) were omitted,

(d)   

for section 87A(3)(b) there were substituted—

“(b)   

all section 2(2) amounts in the Schedule 4C pool have

been reduced to nil.”, and

45

(e)   

references in section 87A(4) to section 87 included

references to this paragraph.

 
 

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

201

 

      (4)  

Section 87A applies for a tax year by virtue of this paragraph

before it applies for that year otherwise than by virtue of this

paragraph.”

123        

Omit paragraphs 8B and 8C (including the heading before paragraph 8B).

124        

In paragraph 9 (available capital payments), omit sub-paragraphs (1) and

5

(2).

125   (1)  

Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended

as follows.

      (2)  

For sub-paragraphs (1) to (3) substitute—

    “(1)  

This paragraph applies if—

10

(a)   

by virtue of section 10A, an amount of chargeable gains

within section 86(1)(e) that accrued in an intervening year

to the trustees of a settlement would be treated as accruing

to a person (“the settlor”) in the year of return, and

(b)   

after paragraph 8 has applied for the year of return, the

15

section 2(2) amount for the intervening year that is in the

Schedule 4C pool for the settlement is less than the amount

mentioned in paragraph (a).

      (2)  

The amount of chargeable gains treated as mentioned in sub-

paragraph (1)(a) as accruing to the settlor in the year of return is

20

limited to the section 2(2) amount referred to in sub-paragraph

(1)(b).”

126        

In paragraph 12A(3), for “87(4)” substitute “87(2)”.

127   (1)  

Paragraph 13 (increase in tax payable under this Schedule) is amended as

follows.

25

      (2)  

For sub-paragraph (1) substitute—

    “(1)  

This paragraph applies if—

(a)   

chargeable gains are treated under paragraph 8 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)

30

amount for a tax year (“the relevant tax year”), and

(b)   

the beneficiary is charged to tax by virtue of the matching.

     (1A)  

Where part of a capital payment is matched, references in sub-

paragraphs (2) and (3) to the capital payment are to the part

matched.”

35

      (3)  

In sub-paragraph (5)(a), for the words from “year of assessment” to the end

(excluding the “and”) substitute “tax year immediately after the relevant tax

year,”.

128        

Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.

Attribution of gains to beneficiaries in cases involving transfers of value: commencement etc

40

129        

The amendments made by paragraphs 114 to 128 have effect in relation to

transfers of value to which Schedule 4B to TCGA 1992 applies that are made

on or after 6 April 2008.

 
 

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

202

 

130        

Schedule 4C to that Act (as it has effect without those amendments) applies

for the tax year 2008-09 and subsequent tax years in relation to Schedule 4C

pools created before 6 April 2008 as if paragraph 7B were omitted.

Transfers of securities: accrued income profits

131        

In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—

5

(a)   

omit the “and” at the end of paragraph (f), and

(b)   

at the end of paragraph (g) insert “, and

(h)   

section 670A of ITA 2007 (accrued income profits).”

132        

In section 617 of ITA 2007 (accrued income profits: income charged), after

subsection (6) insert—

10

“(7)   

Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant

foreign income charged on remittance basis).”

133        

Omit section 644 of that Act (accrued income profits: individuals to whom

remittance basis applies).

134        

After section 670 of that Act insert—

15

Individuals to whom remittance basis applies

670A    

Individuals to whom remittance basis applies

(1)   

This section applies if—

(a)   

accrued income profits are made by an individual as a result

of a transfer of foreign securities, and

20

(b)   

section 809B, 809C or 809D (remittance basis) applies to the

individual for the tax year in which the profits are made.

(2)   

For the purposes of the provisions mentioned in subsection (3), treat

the accrued income profits as relevant foreign income of the

individual.

25

(3)   

The provisions are—

(a)   

Chapter A1 of Part 14 (remittance basis), and

(b)   

Chapter 2 of Part 8 of ITTOIA 2005 (relevant foreign income

charged on remittance basis).

(4)   

For the purposes of sections 809K to 809Q (meaning of “remitted to

30

the United Kingdom” etc)—

(a)   

if the individual is the transferor—

(i)   

treat any consideration for the transfer as deriving

from the accrued income profits, and

(ii)   

if on the transfer the individual does not receive

35

consideration of an amount equal to the market value

of the securities, treat the securities as deriving from

the accrued income profits, and

(b)   

if the individual is the transferee, treat the securities as

deriving from the accrued income profits.

40

(5)   

For the purposes of this section securities are “foreign” if any income

from them would be relevant foreign income.”

 
 

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

203

 

135        

The amendments made by paragraphs 131 to 134 have effect in relation to

transfers of securities where the settlement day is on or after 6 April 2008.

Transfers of assets abroad

136        

ITA 2007 is amended as follows.

137        

In section 720(4) (transfer of assets abroad: charge where power to enjoy

5

income), after “abroad)” insert “and section 726 (non-UK domiciled

individuals to whom remittance basis applies)”.

138        

For section 726 substitute—

“726    

Non-UK domiciled individuals to whom remittance basis applies

(1)   

This section applies in relation to income treated under section 721 as

10

arising to an individual in a tax year (“the deemed income”) if—

(a)   

section 809B, 809C or 809D (remittance basis) applies to the

individual for the year, and

(b)   

the individual is not domiciled in the United Kingdom in the

year.

15

(2)   

For the purposes of this section the deemed income is “foreign” if

(and to the extent that) the income mentioned in section 721(2) would

be relevant foreign income if it were the individual’s.

(3)   

The individual is charged to tax on the foreign deemed income in

accordance with the following provisions.

20

(4)   

If in any tax year any of the foreign deemed income is remitted to the

United Kingdom, tax is charged on the full amount of the foreign

deemed income so remitted in that year.

(5)   

Sections 809K to 809Q (meaning of “remitted to the United

Kingdom” etc) apply in relation to the foreign deemed income as if it

25

were the individual’s relevant foreign income.

(6)   

For the purposes of those sections, treat so much of the income

within section 721(2) as would be relevant foreign income if it were

the individual’s as deriving from the foreign deemed income.”

139        

In section 727 (transfer of assets abroad: charge where capital sums

30

received), after subsection (3) insert—

“(3A)   

But see section 730 (non-UK domiciled individuals to whom

remittance basis applies).”

140        

For section 730 substitute—

“730    

Non-UK domiciled individuals to whom remittance basis applies

35

(1)   

This section applies in relation to income treated under section 728 as

arising to an individual in a tax year (“the deemed income”) if—

(a)   

section 809B, 809C or 809D (remittance basis) applies to the

individual for the year, and

(b)   

the individual is not domiciled in the United Kingdom in the

40

year.

 
 

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

204

 

(2)   

For the purposes of this section the deemed income is “foreign” if

(and to the extent that) the income mentioned in section 728(1)(a)

would be relevant foreign income if it were the individual’s.

(3)   

The individual is charged to tax on the foreign deemed income in

accordance with the following provisions.

5

(4)   

If in any tax year any of the foreign deemed income is remitted to the

United Kingdom, tax is charged on the full amount of the foreign

deemed income so remitted in that year.

(5)   

Sections 809K to 809Q (meaning of “remitted to the United

Kingdom” etc) apply in relation to the foreign deemed income as if it

10

were the individual’s relevant foreign income.

(6)   

For the purposes of those sections, treat so much of the income

within section 728(1)(a) as would be relevant foreign income if it

were the individual’s as deriving from the foreign deemed income.”

141        

In section 731 (transfer of assets abroad: charge where benefit received), after

15

subsection (2) insert—

“(2A)   

But see section 735 (non-UK domiciled individuals to whom

remittance basis applies).”

142        

For section 735 substitute—

“735    

Non-UK domiciled individuals to whom remittance basis applies

20

(1)   

This section applies if—

(a)   

income is treated under section 732 as arising to an individual

in a tax year (“the deemed income”),

(b)   

section 809B, 809C or 809D (remittance basis) applies to the

individual for the year, and

25

(c)   

the individual is not domiciled in the United Kingdom in the

year.

(2)   

For the purposes of this section the deemed income is “foreign” if

(and to the extent that) the relevant income to which it relates would

be relevant foreign income if it were the individual’s.

30

(3)   

The individual is charged to tax on the foreign deemed income in

accordance with the following provisions.

(4)   

If in any tax year any of the foreign deemed income is remitted to the

United Kingdom, tax is charged on the full amount of the foreign

deemed income so remitted in that year.

35

(5)   

Sections 809K to 809Q (meaning of “remitted to the United

Kingdom” etc) apply in relation to the foreign deemed income as if it

were the individual’s relevant foreign income.

(6)   

For the purposes of those sections treat relevant income, or a benefit,

that relates to any part of the foreign deemed income as deriving

40

from that part of the foreign deemed income.

735A    

Section 735: relevant income and benefits relating to foreign deemed

income

(1)   

For the purposes of section 735—

 
 

Finance Bill
Schedule 8 — Rates of research and development relief and vaccine research relief

205

 

(a)   

place the benefits mentioned in Step 1 in the order in which

they were received by the individual (starting with the

earliest benefit received),

(b)   

deduct from those benefits so much of any benefit within

section 734(1)(b) as gives rise as mentioned in section

5

734(1)(d) to chargeable gains,

(c)   

place the income mentioned in Step 3 for the tax years

mentioned in Step 4 (“the relevant income”) in the order in

which it arose (starting with the earliest income to arise),

(d)   

deduct from that income any income that may not be taken

10

into account because of section 743(1) or (2) (no duplication

of charges),

(e)   

place the income treated under section 732(2) as arising to the

individual in respect of the benefits in the order in which it is

treated as arising (starting with the earliest income treated as

15

having arisen), and

(f)   

treat the income mentioned in paragraph (e) as related to—

(i)   

the benefits, and

(ii)   

the relevant income,

   

by matching that income with the benefits and the relevant

20

income (in the orders mentioned in paragraphs (a), (c) and

(e)).

(2)   

In subsection (1) references to a step are to a step in section 733(1).”

143        

The amendments made by paragraphs 137 to 142 have effect for the tax year

2008-09 and subsequent tax years.

25

Schedule 8

Section 24

 

Rates of research and development relief and vaccine research relief

Rates of research and development relief: SMEs

1     (1)  

Part 2 of Schedule 20 to FA 2000 (giving effect to R&D tax relief) is amended

30

as follows.

      (2)  

In each of the following provisions, for “150%” substitute “175%”—

(a)   

paragraph 13 (deduction in computing profits of trade),

(b)   

paragraph 14(2) (alternative treatment of pre-trading expenditure),

and

35

(c)   

paragraph 15(3)(b) (entitlement to R&D tax credit).

      (3)  

In paragraph 16(1)(a) (amount of R&D tax credit), for “16%” substitute

“14%”.

      (4)  

The amendments made by this paragraph have effect in relation to

expenditure incurred on or after such day as the Treasury may by order

40

appoint.

      (5)  

The Treasury may appoint a day before the day on which this Act is passed,

but not one before 1 April 2008.

 
 

Finance Bill
Schedule 9 — Companies in difficulty: SME R&D relief and vaccine research relief

206

 

Rates of research and development tax relief: large companies

2     (1)  

In Schedule 12 to FA 2002, in both of the following provisions, for “25%”

substitute “30%”—

(a)   

paragraph 11(2) (deduction in computing profits of trade), and

(b)   

paragraph 15(4) (refunds of contributions to independent research

5

and development etc).

      (2)  

The amendments made by sub-paragraph (1) have effect in relation to

expenditure incurred on or after 1 April 2008.

Rates of vaccine research relief

3     (1)  

Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.

10

      (2)  

In each of the following provisions, for “50%” substitute “40%”—

(a)   

paragraph 14(2) (deduction in computing profits of trade: small and

medium-sized companies),

(b)   

paragraph 15(2)(a) (alternative treatment of pre-trading expenditure:

deemed trading loss),

15

(c)   

paragraph 15A(2) (modifications for larger SMEs claiming R&D tax

credits),

(d)   

paragraph 21(2) (deduction in computing profits of trade: large

companies), and

(e)   

paragraph 25(4)(a)(i) and (b)(i) (refunds of contributions to

20

independent research and development).

      (3)  

In each of the following provisions, for “150%” substitute “140%”—

(a)   

paragraph 15(2)(b) (alternative treatment of pre-trading

expenditure: deemed trading loss),

(b)   

paragraph 16A(1) (entitlement to tax credit: modifications for larger

25

SMEs),

(c)   

paragraph 21(3) (deduction in computing profits of trade: large

companies), and

(d)   

paragraph 25(4)(a)(ii) and (b)(ii) (refunds of contributions to

independent research and development).

30

      (4)  

The amendments made by this paragraph have effect in relation to

expenditure incurred on or after such day as the Treasury may by order

appoint.

      (5)  

The Treasury may appoint a day before the day on which this Act is passed,

but not one before 1 April 2008.

35

Schedule 9

Section 25

 

Companies in difficulty: SME R&D relief and vaccine research relief

Research and development relief

1     (1)  

Schedule 20 to FA 2000 (relief for expenditure on research and development)

is amended as follows.

40

 
 

 
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