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
177

(ii)
voucher, stamp or similar token or document which is
capable of being exchanged for money, goods or
services.
(4)
References to property being in the United Kingdom are references
to the property—
5
(a)
being in the United Kingdom after being brought to, or
received in, the United Kingdom in circumstances in which
section 809L(2)(a) applies, or
(b)
being used in the United Kingdom in circumstances in which
section 809L(2)(a) applies.
10
Interpretation of Chapter
809Z7
Interpretation of Chapter
(1)
This section applies for the purposes of this Chapter.
(2)
An individual’s “foreign income and gains” for a tax year are—
(a)
the individual’s relevant foreign earnings for that year,
15
(b)
the individual’s foreign specific employment income for that
year,
(c)
the individual’s relevant foreign income for that year, and
(d)
if the individual is not domiciled in the United Kingdom in
that year, the individual’s foreign chargeable gains for that
20
year.
(3)
An individual’s “relevant foreign earnings” for a tax year are—
(a)
if the individual is ordinarily UK resident in that year, the
individual’s chargeable overseas earnings for that year, and
(b)
otherwise, the individual’s general earnings within section
25
26(1) of ITEPA 2003 for that year (non-UK earnings).
(4)
An individual’s “foreign specific employment income” for a tax year
is such of the individual’s specific employment income for that year
as is foreign securities income for the purposes of section 41A of
ITEPA 2003.
30
(5)
An individual’s “foreign chargeable gains” for a tax year are the
foreign chargeable gains (within the meaning of section 12(4) of
TCGA 1992) accruing to the individual in that year.
(6)
In subsection (3)(a) “chargeable overseas earnings” has the same
meaning as in section 22 of ITEPA 2003 (see section 23 of that Act).
35
(7)
“The Commissioners” means the Commissioners for Her Majesty’s
Revenue and Customs.”
Employment income
2
ITEPA 2003 is amended as follows.
3     (1)
Section 6 (nature of charge to tax on employment income) is amended as
40
follows.
      (2)
In subsection (3), omit the “and” at the end of paragraph (a), and after that

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
178

paragraph insert—
“(aa)
whether section 809B, 809D or 809E of ITA 2007 (remittance
basis) applies to an employee for a tax year, and”.
      (3)
After that subsection insert—
“(3A)
The rules in Chapter 5A, which are concerned with the matters
5
mentioned in subsection (3)(a) to (b), apply for the purposes of the
charge to tax on certain specific employment income arising under
Part 7 (securities etc).”
4     (1)
Section 10 (meaning of “taxable earnings” etc) is amended as follows.
      (2)
In subsection (2), for the words after “with” substitute “Chapters 4 and 5 of
10
this Part”.
      (3)
After subsection (3) insert—
“(4)
Subsection (3) is subject to Chapter 5A of this Part (certain specific
employment income under Part 7: individuals to whom to
remittance basis applies).”
15
5     (1)
Section 13 (person liable to tax) is amended as follows.
      (2)
After subsection (4) insert—
“(4A)
If the tax is on specific employment income received, or remitted to
the United Kingdom, after the death of the person in relation to
whom the income is, by virtue of Part 7, to count as employment
20
income, the person’s personal representatives are liable for the tax.”
      (3)
In subsection (5), for “In that event” substitute “If subsection (4) or (4A)
applies,”.
6
For the heading of Chapter 4 of Part 2 substitute “Taxable earnings: UK
resident employees”.
25
7
In section 14(1) (taxable earnings under Chapter 4: introduction), for
“resident, ordinarily resident and domiciled in UK” substitute “UK
resident”.
8
For the heading before section 15 substitute “UK resident employees”.
9     (1)
Section 15 (earnings for year when employee resident, ordinarily resident
30
and domiciled in UK) is amended as follows.
      (2)
In subsection (1), for the words from the first “resident” to the end substitute
“UK resident.”
      (3)
For subsection (3) substitute—
“(3)
Subsection (2) applies whether or not the employment is held when
35
the earnings are received.”
      (4)
Accordingly, in the heading for “resident, ordinarily resident and
domiciled in UK” substitute “UK resident”.
10
For the title to Chapter 5 of Part 2 substitute “Taxable earnings:
remittance basis rules and rules for non-uk resident employees”.
40
11    (1)
Section 20 (taxable earnings under Chapter 5: introduction) is amended as
follows.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
179

      (2)
For subsection (1) substitute—
“(1)
This Chapter—
(a)
contains provision for calculating what are taxable earnings
from certain kinds of employment in a tax year for which
section 809B, 809D or 809E of ITA 2007 (remittance basis)
5
applies to the employee, and
(b)
sets out what are taxable earnings from an employment in a
tax year in which the employee is non-UK resident.”
      (3)
In subsection (2), omit paragraphs (b) and (c).
      (4)
In subsection (3) for “the sections listed in subsection (1)” substitute
10
“sections 22, 26 and 27”.
12
For the heading before section 21 substitute “Remittance basis rules for UK
ordinarily resident employees”.
13
Omit section 21 (earnings for year when employee resident and ordinarily
resident, but not domiciled, in UK, except chargeable overseas earnings).
15
14    (1)
Section 22 (chargeable overseas earnings for year when employee resident
and ordinarily resident, but not domiciled, in UK) is amended as follows.
      (2)
In subsection (1), for the words from “in which” to the end substitute “, to the
extent that they are chargeable overseas earnings for that year, if—
(a)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
20
applies to the employee for that year, and
(b)
the employee is ordinarily UK resident in that year.”
      (3)
For subsection (3) substitute—
“(3)
Subsection (2) applies whether or not the employment is held when
the earnings are remitted.”
25
      (4)
In subsection (4), omit the words after “year”.
      (5)
In subsection (5)(b), for “section 21” substitute “section 15”.
      (6)
After subsection (5) insert—
“(6)
See sections 809L to 809R of ITA 2007 for the meaning of “remitted to
the United Kingdom” etc.
30
(7)
General earnings for the employee for the tax year fall within section
15(1) to the extent that they do not fall within subsection (1).”
      (7)
Accordingly, in the heading, for the words from “employee” to the end
substitute “remittance basis applies and employee ordinarily UK
resident”.
35
15    (1)
Section 23 (calculation of chargeable overseas earnings) is amended as
follows.
      (2)
In subsection (1), for “sections 21 and” substitute “section”.
      (3)
In subsection (2), for paragraph (a) substitute—
“(a)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
40
applies to the employee for that year,
(aa)
the employee is ordinarily UK resident in that year,”.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
180

16
In section 24(7) (limit on chargeable overseas earnings where duties of
associated employment performed in UK), for “section 21(1)” substitute
“section 15(1)”.
17
For the heading before section 25 substitute “Remittance basis rules: employees
not UK ordinarily resident”.
5
18
Omit section 25 (UK-based earnings for year when employee resident, but
not ordinarily resident, in UK).
19    (1)
Section 26 (foreign earnings for year when employee resident, but not
ordinarily resident, in UK) is amended as follows.
      (2)
In subsection (1), for the words from “in which” to “they” substitute “where
10
section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the
employee for that year and the employee is not ordinarily UK resident in
that year, if the general earnings”.
      (3)
For subsection (3) substitute—
“(3)
Subsection (2) applies whether or not the employment is held when
15
the earnings are remitted.”
      (4)
After subsection (4) insert—
“(5)
See sections 809L to 809R of ITA 2007 for the meaning of “remitted to
the United Kingdom” etc.
(6)
General earnings for the employee for the tax year fall within section
20
15(1) if they do not fall within subsection (1).”
      (5)
Accordingly, in the heading for the words from “employee” to the end
substitute “remittance basis applies and employee not ordinarily UK
resident”.
20    (1)
Section 27 (UK-based earnings for year when employee non-UK resident) is
25
amended as follows.
      (2)
For subsection (3) substitute—
“(3)
Subsection (2) applies whether or not the employment is held when
the earnings are received.”
      (3)
After subsection (4) insert—
30
“(5)
Sections 18 and 19 (time when earnings are received) apply for the
purposes of this section.”
21
Omit sections 31 to 37 (and the heading before section 31).

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
181

22
After section 41 insert—
“Chapter 5A
Taxable specific income: effect of remittance basis
Introduction
41A
Taxable specific income from employment-related securities: effect of
5
remittance basis
(1)
This section applies if—
(a)
an amount within subsection (2) counts as employment
income of an individual for a tax year in respect of an
employment (“the securities income”), and
10
(b)
any part of the relevant period (see section 41B) is within a tax
year for which section 809B, 809D or 809E of ITA 2007
(remittance basis) applies to the individual.
(2)
An amount is within this subsection if it counts as employment
income under any provision of any of Chapters 2, 3 and 3C to 5 of
15
Part 7 (employment-related securities etc) except section 446UA.
(3)
The reference in subsection (2) to an amount that counts as
employment income under any of the provisions mentioned there
does not include an amount which counts as employment income by
virtue of any provision of Chapter 3A or 3B of Part 7.
20
(4)
An amount equal to—

is an amount of “taxable specific income” from the employment for
the tax year mentioned in subsection (1)(a).
(5)
In subsection (4)—
(a)
SI is the amount of the securities income, and
25
(b)
FSI is the amount of the securities income that is “foreign”
(see sections 41C to 41E).
(6)
The full amount of any of the foreign securities income which is
remitted to the United Kingdom in a tax year is an amount of
“taxable specific income” from the employment for that year.
30
(7)
Subsection (6) applies whether or not the employment is held when
the foreign securities income is remitted.
(8)
For the purposes of sections 809L to 809R of ITA 2007 (meaning of
“remitted to the United Kingdom” etc) treat the relevant securities or
securities option as deriving from the foreign securities income.
35
(9)
But where—
(a)
the chargeable event is the disposal of the relevant securities
or the assignment or release of the relevant securities option,
and
(b)
the individual receives consideration for the disposal,
40
assignment or release of an amount equal to or exceeding the
market value of the relevant securities or securities option,

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Schedule 7 — Remittance basis
Part 1 — Main provisions
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for the purposes of those sections treat the consideration (and not the
relevant securities or securities option) as deriving from the foreign
securities income.
(10)
In this section and section 41B—
“the chargeable event” means the event giving rise to the
5
securities income, and
“the relevant securities” or “the relevant securities option”
means the employment-related securities or employment-
related securities option by virtue of which the amount
mentioned in subsection (1)(a) counts as employment
10
income.
41B
Section 41A: the relevant period
(1)
“The relevant period” is to be determined as follows.
(2)
In the case of an amount that counts as employment income by virtue
of Chapter 2 (restricted securities) or Chapter 3 (convertible
15
securities), the relevant period—
(a)
begins with the day of the acquisition, and
(b)
ends with the day of the chargeable event.
(3)
In the case of an amount that counts as employment income by virtue
of section 446U (securities acquired for less than market value:
20
discharge of notional loan)—
(a)
if the relevant securities were acquired by virtue of the
exercise of a securities option (“the option”), the relevant
period—
(i)
begins with the day of the acquisition of the option,
25
and
(ii)
ends with the day the option vests, and
(b)
otherwise, the relevant period is—
(i)
the tax year in which the notional loan (within the
meaning of Chapter 3C) is treated as made, or
30
(ii)
if the chargeable event occurs in that year, the period
beginning at the beginning of that year and ending
with the day of that event.
(4)
In the case of an amount that counts as employment income by virtue
of—
35
(a)
Chapter 3D (securities disposed of for more than market
value), or
(b)
Chapter 4 (post-acquisition benefits from securities),

the relevant period is the tax year in which the chargeable event
occurs.
40
(5)
In the case of an amount that counts as employment income by virtue
of Chapter 5 (employment-related securities options), the relevant
period—
(a)
begins with the day of the acquisition, and
(b)
ends with the day of the chargeable event or, if earlier, the
45
day the relevant securities option vests.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
183

(6)
In this section “the acquisition” has the same meaning as in Chapters
2 to 4 or Chapter 5 (see section 421B or 471).
(7)
For the purposes of this section an option “vests” when it is first
capable of being exercised.
(8)
References in this section to a Chapter are to a Chapter of Part 7.
5
41C
Section 41A: foreign securities income
(1)
The extent to which the securities income is “foreign” is to be
determined as follows.
(2)
Treat an equal amount of the securities income as accruing on each
day of the relevant period.
10
(3)
If any part of the relevant period is within a tax year to which
subsection (4) applies, the securities income treated as accruing in
that part of the relevant period is “foreign”.

This is subject to section 41D (limit where duties of associated
employment performed in UK).
15
(4)
This subsection applies to a tax year if—
(a)
section 809B, 809D or 809E of ITA 2007 applies to the
individual for the year,
(b)
the individual is ordinarily UK resident in the year,
(c)
the employment is with a foreign employer, and
20
(d)
the duties of the employment are performed wholly outside
the United Kingdom.
(5)
If any part of the relevant period is within a tax year to which
subsection (6) applies—
(a)
if the duties of the employment are performed wholly
25
outside the United Kingdom, the securities income treated as
accruing in that part of the relevant period is “foreign”, and
(b)
if some but not all of those duties are performed outside the
United Kingdom—
(i)
the securities income mentioned in paragraph (a) is to
30
be apportioned (on a just and reasonable basis)
between duties performed in the United Kingdom
and duties performed outside the United Kingdom,
and
(ii)
the income apportioned in respect of duties
35
performed outside the United Kingdom is “foreign”.
(6)
This subsection applies for a tax year if—
(a)
section 809B, 809D or 809E of ITA 2007 applies to the
individual for the year,
(b)
the individual is not ordinarily UK resident in the year, and
40
(c)
some or all of the duties of the employment are performed
outside the United Kingdom.
(7)
If the individual is not resident in the United Kingdom in a tax year,
for the purposes of this section treat section 809B of ITA 2007 as
applying to the individual for that year.
45