Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
191

(4)
In this section “foreign chargeable gains” means chargeable gains
accruing from the disposal of an asset which is situated outside the
United Kingdom.
(5)
See sections 809L to 809T of ITA 2007 for the meaning of “remitted to
the United Kingdom” etc.”
5
61
In section 16 (computation of losses), omit subsection (4).
62
After that section insert—
“16ZA
Losses: non-UK domiciled individuals
(1)
In this section “the relevant tax year”, in relation to an individual,
means the first tax year for which—
10
(a)
section 809B of ITA 2007 (claim for remittance basis) applies
to the individual, and
(b)
the individual is not domiciled in the United Kingdom.
(2)
An individual may make an election under this section for the
relevant tax year (in which case sections 16ZB and 16ZC have effect
15
in relation to the individual for the relevant tax year and all
subsequent tax years).
(3)
If an individual does not make such an election, foreign losses
accruing to the individual in the relevant tax year or any subsequent
tax year are not allowable losses.
20
(4)
Sections 42 and 43 of the Management Act (procedure and time limit
for making claims), except section 42(1A) of that Act, apply in
relation to an election under this section as they apply in relation to
a claim for relief.
(5)
An election under this section is irrevocable.
25
(6)
In this section “foreign loss” means a loss accruing from the disposal
of an asset situated outside the United Kingdom.
16ZB
Individual who has made election under section 16ZA: foreign
chargeable gains remitted in tax year after tax year in which accrue
(1)
This section applies to an individual for a tax year (“the applicable
30
tax year”) if—
(a)
the individual has made an election under section 16ZA,
(b)
foreign chargeable gains accrued to the individual in or after
the relevant tax year (within the meaning of section 16ZA)
but before the applicable tax year, and
35
(c)
by reason of the remission of any of the foreign chargeable
gains to the United Kingdom, chargeable gains are treated
under section 12 as accruing to the individual in the
applicable tax year (“the relevant gains”).
(2)
Section 2(2) or (4) has effect for the applicable tax year as if the
40
relevant gains had not accrued.
(3)
The amount on which the individual is charged to capital gains tax
for the applicable tax year is (instead of the amount given by section
2(2) or (4)(b), as reduced under section 3) the sum of—
(a)
the adjusted taxable amount, and
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
192

(b)
the amount of the relevant gains.
(4)
“The adjusted taxable amount” is—
(a)
if section 3(1) (annual exempt amount) does not apply to the
individual for the applicable tax year, the amount given by
section 2(2) or (4)(b) as it has effect by virtue of subsection (2),
5
and
(b)
otherwise, so much of that amount as exceeds the exempt
amount for the applicable tax year (within the meaning of
section 3).
(5)
In subsection (1) “foreign chargeable gains” has the meaning given
10
by section 12(4).
(6)
For the purposes of subsection (1)(c) foreign chargeable gains are
remitted to the United Kingdom if they are regarded as so remitted
for the purposes of section 12.
16ZC
Individual who has made election under section 16ZA and to whom
15
remittance basis applies
(1)
This section applies to an individual for a tax year if—
(a)
the individual has made an election under section 16ZA for
the tax year or any earlier tax year,
(b)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
20
applies to the individual for the tax year, and
(c)
the individual is not domiciled in the United Kingdom in the
tax year.
(2)
The following steps apply for the purpose of calculating the amount
on which the individual is to be charged to capital gains tax for the
25
tax year.

Step 1

Deduct any relevant allowable losses from the chargeable gains
referred to in subsection (3) in the order in which they appear there
(starting with paragraph (a) of that subsection).
30

If allowable losses are deductible from the chargeable gains referred
to in subsection (3)(b) but are not enough to exhaust them all—
(a)
those chargeable gains are to be ordered according to the day
on which they accrued,
(b)
the losses are to be deducted from those gains in reverse
35
chronological order (starting with the last chargeable gain to
accrue), and
(c)
if allowable losses are deductible from chargeable gains that
accrued on a particular day but are not enough to exhaust all
of the chargeable gains that accrued on that day, the amount
40
deducted from each of those chargeable gains is the
appropriate proportion of the losses.

In paragraph (c) “the appropriate proportion”, in relation to a
chargeable gain, is the amount of that gain divided by the total
amount of the chargeable gains that accrued on the day in question.
45

Step 2

Treat the amount referred to in section 2(2) or (4)(a) or 16ZB(3)(a) as
being equal to—

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
193

(a)
the amount it would be if there were no relevant allowable
losses, minus
(b)
the total amount deducted under Step 1 from chargeable
gains within subsection (3)(a) or (c).
(3)
The chargeable gains are—
5
(a)
foreign chargeable gains accruing to the individual in the tax
year, to the extent that they are remitted to the United
Kingdom in that year,
(b)
foreign chargeable gains accruing to the individual in that
year, to the extent that they are not so remitted in that year,
10
and
(c)
chargeable gains accruing to the individual in that year (other
than foreign chargeable gains).
(4)
Chargeable gains treated as accruing under section 87 or 89(2) (read,
where appropriate, with section 10A) are not within any paragraph
15
of subsection (3).
(5)
Chargeable gains treated as accruing under section 12 are not within
subsection (3)(c).
(6)
For the purposes of subsection (3) foreign chargeable gains are
remitted to the United Kingdom if they are regarded as so remitted
20
for the purposes of section 12.
(7)
In this section—
“relevant allowable losses” means the allowable losses that
section 2(2) provides may be deducted from chargeable gains
accruing to the individual in the tax year, and
25
“foreign chargeable gains” has the meaning given by section
12(4).
16ZD
Section 16ZC: supplementary
(1)
This section applies if section 16ZC applies to an individual for a tax
year.
30
(2)
Any allowable loss deducted under step 1 of section 16ZC(2) is to be
regarded (for the purposes of section 2(2)(b)) as allowed as a
deduction from chargeable gains accruing to the individual in the tax
year.
(3)
If a deduction is made under step 1 of section 16ZC(2) from a foreign
35
chargeable gain within section 16ZC(3)(b), the amount of the foreign
chargeable gain is reduced by the amount deducted.”
63
In section 119A (increase in expenditure by reference to tax charged in
relation to employment-related securities), after subsection (5) insert—
“(5A)
See also section 119B (unremitted foreign securities income).”
40
64
After that section insert—
“119B
Section 119A: unremitted foreign securities income
(1)
For the purposes of section 119A reduce the amount that counts as
employment income by so much of that amount (if any) as is
unremitted foreign securities income.
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Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
194

(2)
In this section “unremitted foreign securities income” means income
that—
(a)
is foreign securities income for the purposes of section 41A of
ITEPA 2003 (employment income from ERS charged on
remittance basis), and
5
(b)
has not been remitted to the United Kingdom by the end of
the tax year in which the disposal mentioned in section
119A(1) occurs.
(3)
The following provisions apply if any of the unremitted foreign
securities income is remitted to the United Kingdom after the end of
10
the tax year referred to in subsection (2)(b).
(4)
The person liable for the capital gains tax on any chargeable gains
arising on the disposal may make a claim for section 119A(2) to have
effect as if the remitted income had been remitted before the end of
that tax year.
15
(5)
All adjustments (by way of repayment of tax, assessment or
otherwise) are to be made which are necessary to give effect to a
claim under subsection (4).
(6)
Those adjustments may be made at any time, despite anything to the
contrary in any enactment relating to capital gains tax.”
20
Minor and consequential amendments
65
In section 33(2A) of TMA 1970 (error or mistake)—
(a)
omit the “or” at the end of paragraph (a), and
(b)
at the end of paragraph (b) insert “, or
(c)
an error or mistake consisting of the making of a claim
25
under section 809B of ITA 2007 (claim for remittance
basis).”
66
ITTOIA 2005 is amended as follows.
67
In section 839 (annual payments payable out of relevant foreign income),
omit subsection (6).
30
68
In section 840 (relief for backdated pensions charged on arising basis), omit
subsection (4) (application of section 837).
69
After that section insert—
“840A
Claims under section 840
(1)
A claim under section 840 must be made on or before the fifth
35
anniversary of the normal self-assessment filing date for the tax year
for which the relief is claimed.
(2)
All adjustments (by way of repayment of tax, assessment or
otherwise) are to be made which are necessary to give effect to
section 840.
40
(3)
Those adjustments may be made at any time, despite anything to the
contrary in the Income Tax Acts.
(4)
A person’s personal representatives may make any claim under
section 840 which the person might have made.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
195

(5)
If a person dies—
(a)
any tax paid by the person and repayable because of a claim
under section 840 is to be repaid to the personal
representatives, and
(b)
the person’s personal representatives are liable for any
5
additional tax which arises because of a claim under that
section.
(6)
If subsection (5)(b) applies, the additional tax—
(a)
is to be assessed on the personal representatives, and
(b)
is a debt due and payable out of the estate.”
10
70    (1)
Section 857 (partners to whom the remittance basis may apply) is amended
as follows.
      (2)
In subsection (1), for paragraph (c) substitute—
“(c)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to a partner for a tax year.”
15
      (3)
In subsection (3), omit “for the purposes of this Act (see Part 8)”.
      (4)
Accordingly, in the heading for “may apply” substitute “applies”.
71
In section 878 (definitions), omit subsection (2).
72
In Schedule 2 (transitional provision etc), omit paragraphs 150 and 151.
73
In Part 2 of Schedule 4 (index of defined expressions), omit the entry for
20
“person to whom the remittance basis applies”.
74
ITA 2007 is amended as follows.
75
In section 2(14) (overview of Act), before paragraph (a) insert—
“(za)
an alternative basis for charge (the remittance basis) for
certain income and gains of certain individuals (Chapter
25
A1),”.
76
In section 34 (personal allowances etc: introduction), after subsection (2)
insert—
“(3)
For the effect of section 809B (claim for remittance basis to apply)
applying to an individual for a tax year, see section 809G (no
30
entitlement to personal allowance or blind person’s allowance).”
77
In section 42 (tax reductions for married couples etc: introduction), after
subsection (4) insert—
“(5)
For the effect of section 809B (claim for remittance basis to apply)
applying to an individual for a tax year, see section 809G (no
35
entitlement to tax reduction).”
78
In section 460 (residence etc of claimants for relief for life insurance
payments etc), after subsection (3) insert—
“(4)
For the effect of section 809B (claim for remittance basis to apply)
applying to an individual for a tax year, see section 809G (no
40
entitlement under section 457, 458 or 459).”
79
In consequence of the amendments made by this Part of this Schedule,
omit—

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
196

(a)
in ITEPA 2003, paragraph 208 of Schedule 6,
(b)
in ITTOIA 2005, paragraph 429 of Schedule 1, and
(c)
in CRCA 2005, paragraphs 102(3)(b) to (d) and 104 of Schedule 4.
Commencement
80
The amendments made by paragraphs 3(3), 4(3), 5(2), 22, 31 to 33, 38 and 64
5
have effect in relation to employment-related securities and employment-
related securities options where the date of the acquisition is on or after 6
April 2008 (except employment-related securities acquired pursuant to a
securities option acquired before 6 April 2008).
81
The other amendments made by this Part of this Schedule have effect for the
10
tax year 2008-09 and subsequent tax years.
Transitional provision
82    (1)
This paragraph applies in relation to an individual’s general earnings for the
tax year 2007-08 or any earlier tax year (“the relevant tax year”) if the
individual—
15
(a)
was UK resident in that year, but
(b)
was not domiciled in the United Kingdom, or was not ordinarily UK
resident, in that year.
      (2)
Section 22 or 26 of ITEPA 2003 (as amended by this Part of this Schedule)
applies in relation to the general earnings as if—
20
(a)
section 809B of ITA 2007 (claim for remittance basis to apply) applied
to the individual for the relevant tax year, and
(b)
section 22(7) or 26(6) of ITEPA 2003 were omitted.
      (3)
In relation to the general earnings, the definition of “foreign employer” in
section 721(1) of ITEPA 2003 has effect as if at the end there were inserted
25
“and not resident in the Republic of Ireland”.
83    (1)
This paragraph applies to an individual’s relevant foreign income for the tax
year 2007-08 or any earlier tax year (“the relevant tax year”) if—
(a)
the individual made a claim under section 831 of ITTOIA 2005 for the
relevant tax year, or
30
(b)
section 65(5) of ICTA (or any earlier superseded enactment
corresponding to that provision) applied in relation to the individual
for the relevant tax year.
      (2)
Section 832 of ITTOIA 2005 (as amended by this Part of this Schedule)
applies in relation to the relevant foreign income as if section 809B of ITA
35
2007 (claim for remittance basis to apply) applied to the individual for the
relevant tax year.
      (3)
But nothing in section 832 of ITTOIA 2005 applies in relation to any of the
relevant foreign income that arose in the Republic of Ireland.
      (4)
Nothing in section 832A of that Act applies in relation to anything remitted
40
to the United Kingdom in the tax year 2007-08 or any earlier tax year.
84    (1)
This paragraph applies if section 12 of TCGA 1992 (or any corresponding
superseded enactment) applied in relation to a gain accruing to an

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Schedule 7 — Remittance basis
Part 1 — Main provisions
197

individual in the tax year 2007-08 or any earlier tax year (“the relevant tax
year”).
      (2)
Section 12 of TCGA 1992 (as amended by this Part of this Schedule) applies
in relation to that gain as if section 809B of ITA 2007 (claim for remittance
basis to apply) applied to the individual for the relevant tax year.
5
      (3)
Nothing in section 10A of TCGA 1992 applies in relation to any part of the
gain remitted to the United Kingdom in the tax year 2007-08 or any earlier
tax year.
85    (1)
In section 809E(3)(b) of ITA 2007, the reference to a tax year for which section
809B, 809D or 809E of that Act applies to an individual includes a tax year
10
(not later than the tax year 2007-08) in which the individual—
(a)
was UK resident, but
(b)
was not domiciled in the United Kingdom or was not ordinarily UK
resident.
      (2)
In relation to such a tax year, the reference there to the individual’s foreign
15
income and gains includes the individual’s relevant foreign income if (and
only if)—
(a)
the individual made a claim under section 831 of ITTOIA 2005 for the
year, or
(b)
section 65(5) of ICTA (or any earlier superseded enactment
20
corresponding to that provision) applied in relation to the individual
for the year.
86    (1)
Section 809L of ITA 2007 (meaning of “remitted to the United Kingdom”) has
effect subject to this paragraph.
      (2)
In either of the cases set out in sub-paragraph (3) or (4), an individual’s
25
relevant foreign income is not to be treated as remitted to the United
Kingdom by virtue of property of a relevant person being brought to, or
received or used in, the United Kingdom in circumstances in which section
809L(2)(a) applies.
      (3)
The first case is where the property was acquired by the relevant person
30
before 12 March 2008.
      (4)
The second case is where the property—
(a)
was acquired by the relevant person (“the owner”)—
(i)
on or after 12 March 2008, but
(ii)
before 6 April 2008, and
35
(b)
has been brought to, or received or used in, the United Kingdom by
or for the benefit of any relevant person at any time—
(i)
after its acquisition by the owner, and
(ii)
before 6 April 2008.
      (5)
Subject to sub-paragraphs (2) to (4), in relation to an individual’s income and
40
chargeable gains for the tax year 2007-08 or any earlier tax year, section 809L
has effect as if the references to a relevant person were to the individual.
      (6)
In this paragraph “property” does not include money.
      (7)
“Money” has the same meaning as in section 809Y of ITA 2007.