Finance Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
184

(8)
This section is subject to section 41E (foreign securities income: just
and reasonable apportionment).
41D
Limit on foreign securities income where duties of associated
employment performed in UK
(1)
This section imposes a limit on the extent to which section 41C(3)
5
applies in relation to a period when—
(a)
the individual holds associated employments as well as the
employment in relation to which section 41C(4) applies, and
(b)
the duties of the associated employments are not performed
wholly outside the United Kingdom.
10
(2)
The amount of the securities income for the period that is to be
regarded as “foreign” is limited to such amount as is just and
reasonable, having regard to—
(a)
the employment income for the period from all the
employments mentioned in subsection (1)(a),
15
(b)
the proportion of that income that is general earnings to
which section 22 applies (chargeable overseas earnings),
(c)
the nature of and time devoted to the duties performed
outside the United Kingdom, and those performed in the
United Kingdom, in the period, and
20
(d)
all other relevant circumstances.
(3)
In this section “associated employments” means employments with
the same employer or with associated employers.
(4)
Section 24(5) and (6) (meaning of “associated employer”) apply for
the purposes of this section.
25
41E
Foreign securities income: just and reasonable apportionment
(1)
This section applies if the proportion of the securities income that
would otherwise be regarded as “foreign” is not, having regard to all
the circumstances, one that is just and reasonable.
(2)
The amount of the securities income that is “foreign” is such amount
30
as is just and reasonable (rather than the amount calculated in
accordance with section 41C).”
23
Omit Chapter 6 of Part 2 (disputes as to domicile or ordinary residence).
24
In section 225 (payments for restrictive undertakings), for subsections (6)
and (7) substitute—
35
“(6)
This section applies only if—
(a)
section 15 applies to any general earnings from the
employment, and would apply even if the individual made a
claim under section 809B of ITA 2007 (claim for remittance
basis) for the tax year mentioned in subsection (3), or
40
(b)
section 27 (UK-based earnings of non-UK resident employee)
applies to any general earnings from the employment.”
25
In section 271(2) (limited exemption of removal benefits and expenses:
general)—
(a)
in paragraph (a), for the words from “employee” to “UK” substitute
45
“remittance basis applies and employee ordinarily UK resident”, and

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
185

(b)
in paragraph (b), for the words from “employee” to “UK” substitute
“remittance basis applies and employee not ordinarily UK resident”.
26
In section 335(4) (application of deductions provisions), omit “, 21, 25”.
27    (1)
Section 370 (travel costs and expenses where duties performed abroad) is
amended as follows.
5
      (2)
In subsection (1), for the words from “taxable” to “UK)” substitute “relevant
taxable earnings”.
      (3)
After subsection (5) insert—
“(6)
In this section “relevant taxable earnings” means general earnings for
a tax year in which the employee is ordinarily UK resident that—
10
(a)
are taxable earnings under section 15, and
(b)
would be taxable earnings under section 15 even if the
employee made a claim under section 809B of ITA 2007
(claim for remittance basis) for that year.”
28    (1)
Section 371 (travel costs and expenses where duties performed abroad:
15
spouse’s travel etc) is amended as follows.
      (2)
In subsection (1), for the words from “taxable” to “UK)” substitute “relevant
taxable earnings”.
      (3)
After subsection (7) insert—
“(8)
In this section “relevant taxable earnings” has the meaning given by
20
section 370(6).”
29    (1)
Section 378 (deduction from seafarer’s earnings: eligibility) is amended as
follows.
      (2)
In subsection (1)(a), for the words from “taxable” to the end substitute
“relevant taxable earnings,”.
25
      (3)
After subsection (4) insert—
“(5)
In this section “relevant taxable earnings” means general earnings for
a tax year in which the employee is ordinarily UK resident that—
(a)
are taxable earnings under section 15, and
(b)
would be taxable earnings under section 15 even if the
30
employee made a claim under section 809B of ITA 2007
(claim for remittance basis) for that year.”
30    (1)
Section 413 (exception in certain cases of foreign service) is amended as
follows.
      (2)
In subsection (3), for paragraph (a) substitute—
35
“(a)
any earnings from the employment would not be relevant
earnings, or”
      (3)
After that subsection insert—
“(3A)
In subsection (3)(a) “relevant earnings” means—
(a)
for service in or after the tax year 2008-09, earnings—
40
(i)
which are for a tax year in which the employee is
ordinarily UK resident,

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
186

(ii)
to which section 15 applies, and
(iii)
to which that section would apply, even if the
employee made a claim under section 809B of ITA
2007 (claim for remittance basis) for that year, and
(b)
for service before the tax year 2008-09, general earnings to
5
which section 15 or 21 as originally enacted applies.”
31
In section 421E(1) (income relating to securities: exclusions), for the words
from “or 21” to the end substitute “, 22 or 26 applies (earnings for year when
employee UK resident).”
32
In section 446N (securities subject to restriction during relevant period),
10
after subsection (6) insert—
“(7)
If any of the employment income arising under section 426 by virtue
of the chargeable event is foreign securities income within the
meaning of section 41C, reduce the taxable amount mentioned in
subsection (5) by the amount of the foreign securities income.
15
(8)
If any of the employment income that would have arisen (if the non-
commercial interests mentioned in subsection (6) had been
disregarded) under section 426 by virtue of the chargeable event
would have been foreign securities income (within that meaning),
reduce the taxable amount mentioned in subsection (6) by the
20
amount of the foreign securities income.”
33
In section 474(1) (securities options: exclusions), for the words from “or 21”
to the end substitute “, 22 or 26 applies (earnings for year when employee
UK resident).”
34
In section 540(2) (EMI: taxable benefits), for the words from “or 21” to the
25
end substitute “applies (earnings for year when employee UK resident).”
35
In section 690 (PAYE: employee non-UK resident etc), after subsection (2)
insert—
“(2A)
For the purposes of subsection (2) as it applies in relation to an
employee who is UK resident but not ordinarily UK resident in a tax
30
year, the officer may treat section 809B of ITA 2007 (remittance basis)
as applying to the employee for that year, even if no claim under that
section has been made.”
36
In section 698 (PAYE: special charges on employment-related securities),
after subsection (7) insert—
35
“(8)
This section is subject to section 700A (employment-related
securities etc: remittance basis).”
37
In section 700 (PAYE: gains from securities options), after subsection (6)
insert—
“(7)
This section is subject to section 700A (employment-related
40
securities etc: remittance basis).”
38
After that section insert—
“700A
Employment-related securities etc: remittance basis
(1)
This section applies if—
(a)
section 698 or 700 applies, and
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
187

(b)
part or all of the amount that counts as employment income
is foreign securities income or is likely to be foreign securities
income.
(2)
The amount of the payment treated under section 696 as made is
limited to—
5
(a)
the amount that, on the basis of the best estimate that can
reasonably be made, is likely to count as employment
income, minus
(b)
the amount that, on the basis of such an estimate, is likely to
be foreign securities income.
10
(3)
References in this section to “foreign securities income” are to income
that is foreign securities income for the purposes of section 41A.”
39
In section 721(1) (other definitions), for the definition of “foreign employer”
substitute—
““foreign employer” means an individual, partnership or body
15
of persons resident outside, and not resident in, the United
Kingdom,”.
40
In Schedule 1 (index of defined expressions), omit the entries relating to—
(a)
receipt of money earnings (in Chapter 5 of Part 2), and
(b)
receipt of non-money earnings (in Chapter 5 of Part 2).
20
41
In paragraph 8 of Schedule 2 (approved share incentive plans: all-employee
nature of plan), for sub-paragraph (2) substitute—
    “(2)
An employee is a UK resident taxpayer if—
(a)
the employee’s earnings from the employment by
reference to which the employee meets the employment
25
requirement are (or would be if there were any) general
earnings to which section 15 applies (earnings for year
when employee UK resident), and
(b)
those general earnings are (or would be if there were any)
earnings for a tax year in which the employee is ordinarily
30
resident in the United Kingdom.”
42
In paragraph 6(2) of Schedule 3 (approved SAYE option schemes: all-
employee nature of scheme), for paragraph (c) substitute—
“(c)
E’s earnings from the office or employment within
paragraph (a) are (or would be if there were any) general
35
earnings to which section 15 applies (earnings for year
when employee UK resident),
(ca)
those general earnings are (or would be if there were any)
earnings for a tax year in which E is ordinarily resident in
the United Kingdom, and”.
40
43
In paragraph 27(2) of Schedule 5 (enterprise management incentives:
meaning of “working time”)—
(a)
in paragraph (a), for the words from “or 21” to “Kingdom)”
substitute “applies (earnings for year when employee UK resident)”,
and
45
(b)
in paragraph (b), for the words from “resident and” to the end
substitute “UK resident (and none of sections 809B, 809D and 809E of
ITA 2007 (remittance basis) applied to the employee).”

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
188

44
In Schedule 7 (transitionals and savings), omit paragraphs 9 to 12.
Relevant foreign income
45
In section 575 of ITEPA 2003 (foreign pensions: taxable pension income),
omit subsection (4).
46
ITTOIA 2005 is amended as follows.
5
47
In section 260(1) (overview of Part 3)—
(a)
at the end of paragraph (d) insert “and”, and
(b)
omit paragraph (f) (and the “and” before it).
48
In section 269 (territorial scope of charge to tax), omit subsections (3) and (4).
49
Omit Chapter 11 of Part 3 (overseas property income).
10
50
In section 829 (overview of Part 8), for paragraph (a) substitute—
“(a)
the charging of relevant foreign income of a person to whom
section 809B, 809D or 809E of ITA 2007 applies (remittance
basis),”.
51    (1)
Section 830 (meaning of “relevant foreign income”) is amended as follows.
15
      (2)
In subsection (1), for the words from “which” to the end substitute “which—
(a)
arises from a source outside the United Kingdom, and
(b)
is chargeable under any of the provisions specified in
subsection (2) (or would be so chargeable if section 832 did
not apply to it).”
20
      (3)
In subsection (2), omit paragraph (d).
52
Omit section 831 (claims for relevant foreign income to be charged on
remittance basis).
53
For section 832 substitute—
“832
Relevant foreign income charged on remittance basis
25
(1)
This section applies to an individual’s relevant foreign income for a
tax year (“the relevant foreign income”) if section 809B, 809D or 809E
of ITA 2007 (remittance basis) applies to the individual for that year.
(2)
For any tax year in which—
(a)
the individual is UK resident, and
30
(b)
any of the relevant foreign income is remitted to the United
Kingdom,

income tax is charged on the full amount of the relevant foreign
income so remitted in that year.
(3)
Subsection (2) applies whether or not the source of the income exists
35
when the income is remitted.
(4)
See sections 809L to 809R of ITA 2007 for the meaning of “remitted to
the United Kingdom” etc.
832A
Section 832: temporary non-residents
(1)
This section applies if—
40

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
189

(a)
an individual satisfies the residence requirements for any tax
year (“the year of return”),
(b)
the individual did not satisfy those requirements for one or
more tax years immediately before the year of return but did
satisfy those requirements for an earlier tax year,
5
(c)
there are fewer than 5 tax years between—
(i)
the last tax year before the year of return for which the
individual satisfied those requirements (“the year of
departure”), and
(ii)
the year of return, and
10
(d)
the individual satisfied those requirements for at least 4 out
of the 7 tax years immediately before the year of departure.
(2)
Treat any of the individual’s relevant foreign income within
subsection (3) which is remitted to the United Kingdom after the year
of departure and before the year of return as remitted to the United
15
Kingdom in the year of return.
(3)
Relevant foreign income is within this subsection if—
(a)
it is for the year of departure or any earlier tax year, and
(b)
section 832 applies to it.
(4)
For the purposes of subsection (1) an individual “satisfies the
20
residence requirements” for a tax year if—
(a)
at any time in that year, the individual is UK resident and not
Treaty non-resident, or
(b)
the individual is ordinarily UK resident, and is not Treaty
non-resident, for that year.
25
(5)
For the purposes of subsection (4) an individual is “Treaty non-
resident” at any time if, at that time, he is regarded as resident in a
territory outside the United Kingdom for the purposes of double
taxation relief arrangements having effect at that time.
(6)
In subsection (5) “double taxation relief arrangements” means
30
arrangements specified in an Order in Council making any such
provisions as are referred to in section 788 of ICTA.
832B
Section 832: deductions from remitted income
(1)
The only case in which deductions are allowed from the income
mentioned in section 832(2) is where the income is from a trade,
35
profession or vocation carried on outside the United Kingdom.
(2)
In that case the same deductions are allowed as are allowed under
the Income Tax Acts where the trade, profession or vocation is
carried on in the United Kingdom.”
54
Omit sections 833 to 837.
40
Chargeable gains
55
TCGA 1992 is amended as follows.
56    (1)
Section 3 (annual exempt amount) is amended as follows.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
190

      (2)
After subsection (1) insert—
“(1A)
Subsection (1) does not apply to an individual for a tax year if section
809B of ITA 2007 (claim for remittance basis to apply) applies to the
individual for that year.”
      (3)
In subsection (5C)—
5
(a)
after paragraph (a) insert—
“(aa)
if section 16ZB (certain chargeable gains charged on
remittance basis) applies for that year, deducting the
amount of the relevant gains (within the meaning of
that section),” and
10
(b)
in paragraph (b), after “deducting” insert “(from the amount
mentioned in paragraph (a), as reduced under paragraph (aa))”.
57
In section 3A (reporting limits), after subsection (5) insert—
“(5A)
Subsection (1) does not apply to an individual for a tax year if—
(a)
section 809B of ITA 2007 (claim for remittance basis to apply),
15
or
(b)
section 16ZB below (certain chargeable gains charged on
remittance basis),

applies to the individual for that year.”
58
In section 9 (residence etc), omit subsection (2).
20
59
In section 10A (temporary non-residents), after subsection (9) insert—
“(9ZA)
If—
(a)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to the taxpayer for the year of return, and
(b)
the taxpayer is not domiciled in the United Kingdom in that
25
year,

any foreign chargeable gains falling within subsection (2)(a) which
were remitted in an intervening year are treated as remitted in the
year of return.

For this purpose “foreign chargeable gains” has the meaning given
30
by section 12(4).”
60
For section 12 substitute—
“12
Non-UK domiciled individuals to whom remittance basis applies
(1)
This section applies to foreign chargeable gains accruing to an
individual in a tax year (“the foreign chargeable gains”) if—
35
(a)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to the individual for that year, and
(b)
the individual is not domiciled in the United Kingdom in that
year.
(2)
Chargeable gains are treated as accruing to the individual in any tax
40
year in which any of the foreign chargeable gains are remitted to the
United Kingdom.
(3)
The amount of chargeable gains treated as accruing is equal to the
full amount of the foreign chargeable gains so remitted in that year.