Finance Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Finance Bill

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
156

Chapter 1 insert—
“Chapter A1
Remittance basis
Introduction
809A
Overview of Chapter
5
This Chapter provides for an alternative basis of charge in the case of
individuals who are not domiciled in the United Kingdom or are not
ordinarily UK resident.
Application of remittance basis
809B
Claim for remittance basis to apply
10
(1)
This section applies to an individual for a tax year if the individual—
(a)
is UK resident in that year,
(b)
is not domiciled in the United Kingdom in that year or is not
ordinarily UK resident in that year, and
(c)
makes a claim under this section for that year.
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(2)
The claim must contain one or both of the following statements—
(a)
that the individual is not domiciled in the United Kingdom in
that year;
(b)
that the individual is not ordinarily UK resident in that year.
(3)
Sections 42 and 43 of TMA 1970 (procedure and time limit for
20
making claims), except section 42(1A) of that Act, apply in relation to
a claim under this section as they apply in relation to a claim for
relief.
809C
Claim for remittance basis by long-term UK resident: nomination of
foreign income and gains to which section 809H(2) is to apply
25
(1)
This section applies to an individual for a tax year if the individual—
(a)
is aged 18 or over in that year, and
(b)
has been UK resident in at least 7 of the 9 tax years
immediately preceding that year.
(2)
A claim under section 809B by the individual for that year must
30
contain a nomination of the income or chargeable gains of the
individual for that year to which section 809H(2) is to apply.
(3)
The income or chargeable gains nominated must be part (or all) of
the individual’s foreign income and gains for that year.
(4)
The income and chargeable gains nominated must be such that the
35
relevant tax increase does not exceed £30,000.
(5)
“The relevant tax increase” is—
(a)
the total amount of income tax and capital gains tax payable
by the individual for that year, minus
(b)
the total amount of income tax and capital gains tax that
40
would be payable by the individual for that year apart from
section 809H(2).

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
157

(6)
See section 809Z7 for the meaning of an individual’s foreign income
and gains for a tax year.
809D
Application of remittance basis without claim where unremitted
foreign income and gains under £2,000
(1)
This section applies to an individual for a tax year if—
5
(a)
the individual is UK resident in that year,
(b)
the individual is not domiciled in the United Kingdom in that
year or is not ordinarily UK resident in that year, and
(c)
the amount of the individual’s unremitted foreign income
and gains for that year is less than £2,000.
10
(2)
The amount of an individual’s “unremitted” foreign income and
gains for a tax year is—
(a)
the total amount of what would (if this section applied) be the
individual’s foreign income and gains for that year, minus
(b)
the total amount of those income and gains that are remitted
15
to the United Kingdom in that year.
809E
Application of remittance basis without claim: other cases
(1)
This section applies to an individual for a tax year if—
(a)
the individual is UK resident in that year,
(b)
the individual is not domiciled in the United Kingdom in that
20
year or is not ordinarily UK resident in that year,
(c)
the individual has no UK income or gains for that year,
(d)
no relevant income or gains are remitted to the United
Kingdom in that year, and
(e)
either—
25
(i)
the individual has been UK resident in not more than
6 of the 9 tax years immediately preceding that year,
or
(ii)
the individual is under 18 throughout that year.
(2)
For the purposes of subsection (1)(c) the individual’s “UK income
30
and gains” for the tax year are the individual’s income and
chargeable gains for that year other than what would (if this section
applied) be the individual’s foreign income and gains for that year.
(3)
For the purposes of subsection (1)(d) “relevant” income and gains
are—
35
(a)
what would (if this section applied) be the individual’s
foreign income and gains for the tax year mentioned in
subsection (1), and
(b)
the individual’s foreign income and gains for every other tax
year for which section 809B or 809D or this section applies to
40
the individual.
Effect of section 809B, 809D or 809E applying
809F
Effect on what is chargeable
(1)
This section applies if section 809B, 809D or 809E applies to an
individual for a tax year.
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Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
158

(2)
The individual’s relevant foreign earnings for that year are charged
in accordance with section 22 or 26 of ITEPA 2003.
(3)
The individual’s relevant foreign income for that year is charged in
accordance with section 832 of ITTOIA 2005.
(4)
If the individual is not domiciled in the United Kingdom in that year,
5
the individual’s foreign chargeable gains for that year are charged in
accordance with section 12 of TCGA 1992.
(5)
For the effect on amounts which count as employment income of the
individual under certain provisions of Part 7 of ITEPA 2003
(employment-related securities), see Chapter 5A of Part 2 of that Act.
10
(6)
Nothing in this section applies in relation to nominated income or
chargeable gains (see section 809H).
809G
Claim for remittance basis: effect on allowances etc
(1)
This section applies if section 809B (claim for remittance basis to
apply) applies to an individual for a tax year.
15
(2)
For that year, the individual is not entitled to—
(a)
any allowance under Chapter 2 of Part 3 (personal allowance
and blind person’s allowance),
(b)
any tax reduction under Chapter 3 of that Part (tax reductions
for married couples and civil partners), or
20
(c)
any relief under section 457, 458 or 459 (payments for life
insurance etc).
(3)
See also section 3(1A) of TCGA 1992 (no annual exempt amount for
chargeable gains).
809H
Claim for remittance basis by long-term UK resident: charge
25
(1)
This section applies if—
(a)
section 809B (claim for remittance basis to apply) applies to
an individual for a tax year (“the relevant tax year”),
(b)
the individual is aged 18 or over in the relevant tax year, and
(c)
the individual has been UK resident in at least 7 of the 9 tax
30
years immediately preceding the relevant tax year.
(2)
Income tax is charged on nominated income, and capital gains tax is
charged on nominated chargeable gains, as if section 809B did not
apply to the individual for the relevant tax year (and neither did
section 809D).
35
(3)
“Nominated” income or chargeable gains means income or
chargeable gains nominated under section 809C in the individual’s
claim under section 809B for the relevant tax year.
(4)
If the relevant tax increase would otherwise be less than £30,000,
subsection (2) has effect as if—
40
(a)
in addition to the income and gains actually nominated
under section 809C in the individual’s claim under section
809B for the relevant tax year, an amount of income had been
nominated so as to make the relevant tax increase equal to
£30,000, and
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Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
159

(b)
the individual’s income for that year were such that such a
nomination could have been made (if that is not the case).
(5)
“The relevant tax increase” is—
(a)
the total amount of income tax and capital gains tax payable
by the individual for the relevant tax year, minus
5
(b)
the total amount of income tax and capital gains tax that
would be payable by the individual for the relevant tax year
apart from subsection (2).
(6)
Nothing in subsection (4) affects what is regarded, for the purposes
of section 809I or 809J, as nominated under section 809C.
10
809I
Remittance basis charge: income and gains treated as remitted
(1)
This section applies if—
(a)
any of an individual’s nominated income and gains is
remitted to the United Kingdom in a tax year, and
(b)
any of the individual’s remittance basis income and gains has
15
not been remitted to the United Kingdom in or before that
year.
(2)
Income tax and capital gains tax are charged, for that year and
subsequent tax years, as if the income and chargeable gains treated
under section 809J as remitted to the United Kingdom by the
20
individual in that tax year had been so remitted (and income and
chargeable gains of the individual that were actually remitted in that
year had not been).
(3)
An individual’s “nominated income and gains” are the total income
and chargeable gains nominated by the individual under section
25
809C for the tax year mentioned in subsection (1)(a) or any earlier tax
year.
(4)
An individual’s “remittance basis income and gains” are the foreign
income and gains of the individual for all the tax years (up to and
including the tax year mentioned in subsection (1)(a)) for which
30
section 809B, 809D or 809E applies to the individual, apart from the
individual’s nominated income and gains.
809J
Section 809I: order of remittances
(1)
If section 809I applies, the following steps are to be taken for the
purpose of determining the income or gains treated in a tax year
35
(“the relevant tax year”) as remitted to the United Kingdom by the
individual.

Step 1

Find the total amount of—
(a)
the individual’s nominated income and gains, and
40
(b)
the individual’s remittance basis income and gains,

that have been remitted to the United Kingdom in the relevant tax
year.

This amount is “the relevant amount”.

Step 2
45

Find the amount of foreign income and gains of the individual for the
relevant tax year (other than income or chargeable gains nominated

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
160

under section 809C) that is within each of the categories of income
and gains in paragraphs (a) to (h) of subsection (2).

If none of sections 809B, 809D and 809E apply to the individual for
that year, treat those amounts as nil (and accordingly go to step 6).

Step 3
5

Find the earliest paragraph for which the amount determined under
step 2 is not nil.

If that amount does not exceed the relevant amount, treat the
individual as having remitted the income or gains within that
paragraph (and for that tax year).
10

Otherwise, treat the individual as having remitted the relevant
proportion of each kind of income or gains within that paragraph
(and for that tax year).

“The relevant proportion” is the relevant amount divided by the
amount determined under step 2 for that paragraph.
15

Step 4

Reduce the relevant amount by the amount taken into account under
step 3.

Step 5

If the relevant amount (as reduced under step 4) is not nil, start again
20
at step 3.

In step 3, read the reference to the earliest paragraph of the kind
mentioned there as a reference to the earliest such paragraph which
has not previously been taken into account under that step.

Step 6
25

If the relevant amount (as reduced) is not nil once steps 3 to 5 have
been undertaken in relation to all paragraphs of subsection (2) for
which the amount determined under step 2 is not nil, start again at
step 2.

In step 2, read the reference to the foreign income and gains of the
30
individual for the relevant tax year as a reference to such of the
foreign income and gains of the individual for the appropriate tax
year as had not been remitted by the beginning of the relevant tax
year.

“The appropriate tax year” is the latest tax year which is—
35
(a)
before the last tax year for which step 2 has been undertaken,
and
(b)
a tax year for which section 809B, 809D or 809E applies to the
individual.
(2)
The kinds of income and gains are—
40
(a)
relevant foreign earnings (other than those subject to a
foreign tax),
(b)
foreign specific employment income (other than income
subject to a foreign tax),
(c)
relevant foreign income (other than income subject to a
45
foreign tax),
(d)
foreign chargeable gains (other than gains subject to a foreign
tax),
(e)
relevant foreign earnings subject to a foreign tax,
(f)
foreign specific employment income subject to a foreign tax,
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Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
161

(g)
relevant foreign income subject to a foreign tax, and
(h)
foreign chargeable gains subject to a foreign tax.
(3)
In this section the individual’s “nominated income and gains” are the
total income and chargeable gains nominated by the individual
under section 809C for the relevant tax year or any earlier tax year.
5
(4)
In step 1 of subsection (1) the individual’s “remittance basis income
and gains” are the foreign income and gains of the individual for all
the tax years (up to and including the relevant tax year) for which
section 809B, 809D or 809E applies to the individual, apart from the
individual’s nominated income and gains.
10
(5)
In step 6 of subsection (1) the reference to income or gains being
remitted is—
(a)
as respects any tax year before section 809I applies, to income
or gains being remitted to the United Kingdom, and
(b)
as respects any tax year in relation to which that section
15
applies, to income or gains treated under this section as so
remitted.
(6)
In subsection (2) “foreign tax” means any tax chargeable under the
law of a territory outside the United Kingdom.
Remittance of income and gains: introduction
20
809K
Sections 809L to 809Z6: introduction
(1)
Sections 809L to 809Z6 apply for the purposes of—
(a)
this Chapter,
(b)
sections 22 and 26 of ITEPA 2003 (relevant foreign earnings
charged on remittance basis),
25
(c)
section 41A of that Act (specific employment income from
securities etc charged on remittance basis),
(d)
section 832 of ITTOIA 2005 (relevant foreign income charged
on remittance basis), and
(e)
section 12 of TCGA 1992 (foreign chargeable gains charged
30
on remittance basis).
(2)
Those sections—
(a)
explain what is meant by income or chargeable gains being
“remitted to the United Kingdom” (sections 809L to 809O),
(b)
provide for the calculation of the amount remitted (section
35
809P),
(c)
contain rules for attributing transfers from mixed funds to
particular kinds of income and capital (sections 809Q to
809S),
(d)
contain supplementary provision for certain cases (sections
40
809T and 809U), and
(e)
treat income or chargeable gains as not remitted to the United
Kingdom in certain cases (sections 809V to 809Z6).

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Schedule 7 — Remittance basis
Part 1 — Main provisions
162

Remittance of income and gains: meaning of “remitted to the United Kingdom”
809L
Meaning of “remitted to the United Kingdom”
(1)
An individual’s income is, or chargeable gains are, “remitted to the
United Kingdom” if—
(a)
conditions A and B are met,
5
(b)
condition C is met, or
(c)
condition D is met.
(2)
Condition A is that—
(a)
money or other property is brought to, or received or used in,
the United Kingdom by or for the benefit of a relevant person,
10
or
(b)
a service is provided in the United Kingdom to or for the
benefit of a relevant person.
(3)
Condition B is that—
(a)
the property, or consideration for the service, is (wholly or in
15
part) the income or chargeable gains,
(b)
the property or consideration is—
(i)
property of a relevant person, or
(ii)
consideration given by a relevant person,

that derives (wholly or in part, and directly or indirectly)
20
from the income or chargeable gains,
(c)
the income or chargeable gains are used outside the United
Kingdom (directly or indirectly) in respect of a relevant debt,
or
(d)
anything deriving (wholly or in part, and directly or
25
indirectly) from the income or chargeable gains is used as
mentioned in paragraph (c).
(4)
Condition C is that qualifying property of a gift recipient—
(a)
is brought to, or received or used in, the United Kingdom,
and is enjoyed by a relevant person,
30
(b)
is consideration for a service that is enjoyed in the United
Kingdom by a relevant person, or
(c)
is used outside the United Kingdom (directly or indirectly) in
respect of a relevant debt.
(5)
Condition D is that property of a person other than a relevant person
35
(apart from qualifying property of a gift recipient)—
(a)
is brought to, or received or used in, the United Kingdom,
and is enjoyed by a relevant person,
(b)
is consideration for a service that is enjoyed in the United
Kingdom by a relevant person, or
40
(c)
is used outside the United Kingdom (directly or indirectly) in
respect of a relevant debt,

in circumstances where there is a connected operation.
(6)
In a case where subsection (4)(a) or (b) or (5)(a) or (b) applies to the
importation or use of property, the income or chargeable gains are
45
taken to be remitted at the time the property or service is first
enjoyed by a relevant person by virtue of that importation or use.