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

163

 

(7)   

In this section “relevant debt” means a debt that relates (wholly or in

part, and directly or indirectly) to—

(a)   

property falling within subsection (2)(a),

(b)   

a service falling within subsection (2)(b),

(c)   

qualifying property dealt with as mentioned in subsection

5

(4)(a),

(d)   

a service falling within subsection (4)(b),

(e)   

qualifying property dealt with as mentioned in subsection

(5)(a), or

(f)   

a service falling within subsection (5)(b).

10

(8)   

For that purpose, the reference to a debt that relates to property or a

service includes a debt for interest on money lent, where the lending

relates to the property or service.

(9)   

If the service mentioned in subsection (2)(b) is the income or

chargeable gains, references in subsection (3)(a) and section 809P(2)

15

to the property include the service.

(10)   

The cases in which income or chargeable gains are used in respect of

a debt include cases where income or chargeable gains are used to

pay interest on the debt.

(11)   

This section is subject to sections 809V to 809Z6 (property treated as

20

not remitted to the United Kingdom).

809M    

Meaning of relevant person

(1)   

This section applies for the purposes of sections 809L to 809O.

(2)   

A “relevant person” is—

(a)   

the individual,

25

(b)   

the individual’s husband or wife,

(c)   

the individual’s civil partner,

(d)   

a child or grandchild of a person falling within any of

paragraphs (a) to (c), if the child or grandchild has not

reached the age of 18,

30

(e)   

a close company in which a person falling within any other

paragraph of this subsection is a participator,

(f)   

a company in which a person falling within any other

paragraph of this subsection is a participator, and which

would be a close company if it were resident in the United

35

Kingdom,

(g)   

the trustees of a settlement of which a person falling within

any other paragraph of this subsection is a beneficiary, or

(h)   

a body connected with such a settlement.

(3)   

For that purpose—

40

(a)   

a man and woman living together as husband and wife are

treated as if they were husband and wife,

(b)   

two people of the same sex living together as if they were civil

partners of each other are treated as if they were civil partners

of each other,

45

(c)   

“close company” has the same meaning as in the Corporation

Tax Acts (see sections 414 and 415 of ICTA),

 
 

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

164

 

(d)   

“settlement” and “settlor” have the same meaning as in

Chapter 2 of Part 9,

(e)   

“beneficiary”, in relation to a settlement, means any person

who receives, or may receive, any benefit under or by virtue

of the settlement,

5

(f)   

“trustee” has the same meaning as in section 993 (see, in

particular, section 994(3)), and

(g)   

a body is “connected with” a settlement if the body falls

within section 993(3)(c), (d), (e) or (f) as regards the

settlement.

10

809N    

Section 809L: gift recipients, qualifying property and enjoyment

(1)   

This section applies for the purposes of determining whether or not

income or chargeable gains of an individual are remitted to the

United Kingdom by virtue of condition C in section 809L(4).

(2)   

A “gift recipient” means a person, other than a relevant person, to

15

whom the individual makes a gift of money or other property that—

(a)   

is income or chargeable gains of the individual, or

(b)   

derives (wholly or in part, and directly or indirectly) from

income or chargeable gains of the individual.

(3)   

The question of whether or not a person is a relevant person is to be

20

determined by reference to the time when a gift is made.

(4)   

But, if a person to whom a gift is made subsequently becomes a

relevant person, the person ceases to be a gift recipient.

(5)   

The individual “makes a gift of” property if the individual disposes

of the property—

25

(a)   

for no consideration, or

(b)   

for consideration less than the full consideration in money or

money’s worth that would be given if the disposal were by

way of a bargain made at arm’s length;

   

but, in a case falling in paragraph (b), the individual is to be taken to

30

make a gift of only so much of the property as exceeds the

consideration actually given.

(6)   

A reference to the individual making a gift of property includes a

case where—

(a)   

the individual retains an interest in the property, or

35

(b)   

an interest, right or arrangement enables or entitles the

individual to benefit from the property.

(7)   

“Qualifying property”, in relation to a gift recipient, is—

(a)   

the property that the individual gave to the gift recipient,

(b)   

anything that derives (wholly or in part, and directly or

40

indirectly) from that property, or

(c)   

any other property, but only if it is dealt with as mentioned

in section 809L(4)(a), (b) or (c) by virtue of an operation which

is effected—

(i)   

with reference to the gift of the property to the gift

45

recipient, or

 
 

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

165

 

(ii)   

with a view to enabling or facilitating the gift of the

property to the gift recipient to be made.

(8)   

In subsection (7)—

(a)   

the reference in paragraph (b) to anything deriving from

property, and

5

(b)   

the reference in paragraph (c) to other property,

   

includes a thing, or property, that does not belong to the individual

but which the individual is enabled or entitled to benefit from by

virtue of any interest, right or arrangement.

(9)   

Enjoyment by a relevant person of property or a service is to be

10

disregarded in any of these cases—

(a)   

if the property or service is enjoyed virtually to the entire

exclusion of all relevant persons,

(b)   

if full consideration in money or money’s worth is given by a

relevant person for the enjoyment, or

15

(c)   

the property or service is enjoyed by relevant persons in the

same way, and on the same terms, as it may be enjoyed by the

general public or by a section of the general public.

(10)   

The provisions of this section apply for the purposes of sections 809L

to 809O.

20

809O    

Section 809L: dealings where there is a connected operation

(1)   

This section applies for the purposes of determining whether or not

income or chargeable gains of an individual are remitted to the

United Kingdom by virtue of condition D in section 809L(5).

(2)   

For the purposes of section 809L(5), the question of whether or not

25

the person whose property is dealt with as mentioned in paragraph

(a), (b) or (c) of section 809L(5) is a relevant person is to be

determined by reference to the time when the property is so dealt

with.

(3)   

A “connected operation”, in relation to property dealt with as

30

mentioned in section 809L(5)(a), (b) or (c), means an operation which

is effected—

(a)   

with reference to a qualifying disposition, or

(b)   

with a view to enabling or facilitating a qualifying

disposition.

35

(4)   

A “qualifying disposition” is a disposition that—

(a)   

is made by a relevant person,

(b)   

is made to, or for the benefit of, the person whose property is

dealt with as mentioned in section 809L(5)(a), (b) or (c), and

(c)   

is a disposition of money or other property that is, or derives

40

(wholly or in part, and directly or indirectly) from, income or

chargeable gains of the individual.

(5)   

But a disposition of property is not a qualifying disposition if the

disposition is, or is part of, the giving of full consideration in money

or money’s worth for the dealing that falls within section 809L(5)(a),

45

(b) or (c).

 
 

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

166

 

(6)   

Enjoyment by a relevant person of property or a service is to be

disregarded in any of these cases—

(a)   

if the property or service is enjoyed virtually to the entire

exclusion of all relevant persons,

(b)   

if full consideration in money or money’s worth is given by a

5

relevant person for the enjoyment, or

(c)   

the property or service is enjoyed by relevant persons in the

same way, and on the same terms, as it may be enjoyed by the

general public or by a section of the general public.

(7)   

The provisions of this section apply for the purposes of sections 809L

10

to 809N (and this section).

Remittance of income and gains: amount remitted

809P    

Section 809L: amount remitted

(1)   

The amount of income or chargeable gains remitted to the United

Kingdom is to be determined as follows.

15

(2)   

If the property or consideration is the income or chargeable gains, the

amount remitted is equal to the amount of the income or chargeable

gains.

(3)   

If the property or consideration derives from the income or

chargeable gains, the amount remitted is equal to the amount of

20

income or chargeable gains from which the property or

consideration derives.

(4)   

If the income or chargeable gains are used as mentioned in section

809L(3)(c), the amount remitted is equal to the amount of income or

chargeable gains used; but this is subject to subsection (10).

25

(5)   

If anything deriving from the income or chargeable gains is used as

mentioned in section 809L(3)(c), the amount remitted is equal to the

amount of income or chargeable gains from which what is used

derives; but this is subject to subsection (10).

(6)   

In a case falling within section 809L(4)(a) or (b), the amount remitted

30

is equal to the amount of the relevant income or chargeable gains.

(7)   

In a case falling within section 809L(4)(c), the amount remitted is

equal to the amount of the relevant income or chargeable gains; but

this is subject to subsection (10).

(8)   

In a case falling within section 809L(5)(a) or (b), the amount remitted

35

is equal to the amount of the income or chargeable gains referred to

in section 809O(4)(c).

(9)   

In a case falling within section 809L(5)(c), the amount remitted is

equal to the amount of the income or chargeable gains referred to in

section 809O(4)(c); but this is subject to subsection (10).

40

(10)   

If the debt is only partly in respect of the property or service, the

amount remitted is (if it would otherwise be greater) limited to the

amount the debt would be if it were wholly in respect of the property

or service.

 
 

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

167

 

(11)   

In subsections (6) and (7) “relevant income or chargeable gains”

means—

(a)   

if the qualifying property falls within section 809N(7)(a), the

income or gains—

(i)   

of which the qualifying property consists, or

5

(ii)   

from which the qualifying property derives;

(b)   

if the qualifying property falls within section 809N(7)(b), the

income or gains—

(i)   

of which the property given to the gift recipient

consisted, or

10

(ii)   

from which that property derived;

(c)   

if the qualifying property falls within section 809N(7)(c), the

income or gains—

(i)   

of which the property given to the gift recipient

consists, or

15

(ii)   

from which that property derives.

(12)   

If the amount remitted (taken together with any amount previously

remitted) would otherwise exceed the amount of the income or

chargeable gains, the amount remitted is limited to the amount

which, when taken together with any amount previously remitted, is

20

equal to the amount of the income or chargeable gains.

Remittance of income and gains: transfers from mixed funds

809Q    

Sections 809L and 809P: transfers from mixed funds

(1)   

This section applies for the purposes mentioned in subsection (2)

where condition A in section 809L is met and—

25

(a)   

the property or consideration for the service is (wholly or in

part), or derives (wholly or in part, and directly or indirectly)

from, a transfer from a mixed fund, or

(b)   

a transfer from a mixed fund, or anything deriving (wholly or

in part, and directly or indirectly) from such a transfer, is

30

used as mentioned in section 809L(3)(c).

(2)   

The purposes referred to in subsection (1) are—

(a)   

determining whether condition B in section 809L is met, and

(b)   

if it is met, determining (under section 809P) the amount of

income or chargeable gains remitted.

35

(3)   

The extent to which the transfer is of the individual’s income or

chargeable gains is to be determined as follows.

   

Step 1

   

For each of the categories of income and capital in paragraphs (a) to

(i) of subsection (4), find (applying section 809R) the amount of

40

income or capital of the individual for the relevant tax year in the

mixed fund immediately before the transfer.

   

“The relevant tax year” is the tax year in which the transfer occurs.

   

Step 2

   

Find the earliest paragraph for which the amount determined under

45

step 1 is not nil.

 
 

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

168

 

   

If that amount does not exceed the amount of the transfer, treat the

transfer as containing the income or capital within that paragraph

(and for that tax year).

   

Otherwise, treat the transfer as containing the relevant proportion of

each kind of income or capital within that paragraph (and for that tax

5

year).

   

“The relevant proportion” is the amount of the transfer divided by

the amount determined under step 1 for that paragraph.

   

Step 3

   

Treat the amount of the transfer as reduced by the amount taken into

10

account under step 2.

   

Step 4

   

If the amount of the transfer (as reduced under step 3) is not nil, start

again at step 2.

   

In step 2, read the reference to the earliest paragraph of the kind

15

mentioned there as a reference to the earliest such paragraph which

has not previously been taken into account under that step in relation

to the transfer.

   

Step 5

   

If the amount of the transfer (as reduced under step 3) is not nil once

20

steps 2 and 3 have been undertaken in relation to all paragraphs of

subsection (4) for which the amount determined under step 1 is not

nil, start again at step 1.

   

In step 1, read the reference to the relevant tax year as a reference to

the tax year immediately before the last tax year for which step 1 has

25

been undertaken in relation to the transfer.

(4)   

The kinds of income and capital are—

(a)   

employment income (other than income within paragraph

(b), (c) or (f)),

(b)   

relevant foreign earnings (other than income within

30

paragraph (f)),

(c)   

foreign specific employment income (other than income

within paragraph (f)),

(d)   

relevant foreign income (other than income within paragraph

(g)),

35

(e)   

foreign chargeable gains (other than chargeable gains within

paragraph (h)),

(f)   

employment income subject to a foreign tax,

(g)   

relevant foreign income subject to a foreign tax,

(h)   

foreign chargeable gains subject to a foreign tax, and

40

(i)   

income or capital not within another paragraph of this

subsection.

(5)   

In subsection (4) “foreign tax” means any tax chargeable under the

law of a territory outside the United Kingdom.

(6)   

In this section “mixed fund” means money or other property which,

45

immediately before the transfer, contains or derives from—

(a)   

more than one of the kinds of income and capital mentioned

in subsection (4), or

(b)   

income or capital for more than one tax year.

 
 

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

169

 

(7)   

References in this section to the amount of the transfer include the

market value of it.

809R    

Section 809Q: composition of mixed fund

(1)   

This section applies for the purposes of step 1 of section 809Q(3)

(composition of mixed fund).

5

(2)   

If property which derives (wholly or in part, and directly or

indirectly) from an individual’s income or gains within a relevant

paragraph (and for a tax year) is transferred to a mixed fund, treat

the transfer as consisting of or containing the income or gains.

(3)   

If a debt (wholly or in part, and directly or indirectly) in respect of a

10

mixed fund is satisfied by—

(a)   

an individual’s income or gains within a relevant paragraph

(and for a tax year), or

(b)   

anything deriving (directly or indirectly) from such income

or gains,

15

   

treat the income or gains as transferred to the fund.

(4)   

Treat an offshore transfer from a mixed fund as containing the

appropriate proportion of each kind of income or capital in the fund

immediately before the transfer.

   

“The appropriate proportion” means the amount (or market value)

20

of the transfer divided by the market value of the mixed fund

immediately before the transfer.

(5)   

In subsections (2) and (3) “relevant paragraph” means any of

paragraphs (a) to (h) of section 809Q(4).

(6)   

A transfer from a mixed fund is an “offshore transfer” for the

25

purposes of subsection (4) if and to the extent that section 809Q does

not apply in relation to it.

(7)   

Treat a transfer from a mixed fund as an “offshore transfer” (and

section 809Q as not applying in relation to it, if it otherwise would

do) if and to the extent that, at the end of a tax year in which it is

30

made—

(a)   

section 809Q does not apply in relation to it, and

(b)   

on the basis of the best estimate that can reasonably be made

at that time, section 809Q will not apply in relation to it.

(8)   

If section 809Q applies in relation to more than one transfer from a

35

mixed fund, when undertaking step 1 in relation to the second or any

subsequent transfer take into account the effect of step 2 of section

809Q(3) (composition of transfer) as it applied in relation to each

earlier transfer.

809S    

Section 809Q: anti-avoidance

40

(1)   

This section applies if, by reason of an arrangement the main

purpose (or one of the main purposes) of which is to secure an

income tax advantage or capital gains tax advantage, a mixed fund

would otherwise be regarded as containing income or capital within

any of paragraphs (f) to (i) of section 809Q(4).

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