Finance Bill

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Session 2007 - 08
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Finance Bill

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 1 — Main provisions
198

87
Section 809N of ITA 2007 (section 809L: gift recipients, qualifying property
and enjoyment) has effect in relation to an individual’s income and
chargeable gains for the tax year 2007-08 or any earlier tax year as if—
(a)
the reference in subsection (2) to a relevant person were to the
individual,
5
(b)
subsections (3) and (4) were omitted, and
(c)
the references in subsection (9) to a relevant person, all relevant
persons, or relevant persons were to the individual.
88
Section 809O of ITA 2007 (section 809L: dealings where there is a connected
operation) has effect in relation to an individual’s income and chargeable
10
gains for the tax year 2007-08 or any earlier tax year as if—
(a)
subsection (2) were omitted, and
(b)
the references in subsections (4) and (6) to a relevant person, all
relevant persons, or relevant persons were to the individual.
89
Sections 809Q to 809S of ITA 2007 (transfers from mixed funds) do not apply
15
for the purposes of determining whether income or chargeable gains for the
tax year 2007-08 or any earlier tax year are remitted to the United Kingdom
(or the amount of any such income or chargeable gains so remitted).
90    (1)
This paragraph applies if—
(a)
before 12 March 2008, money was lent to an individual outside the
20
United Kingdom,
(b)
the loan was made for the purpose of enabling the individual to
acquire an interest in residential property in the United Kingdom
(and for no other purpose), and
(c)
before 6 April 2008—
25
(i)
the money was received in the United Kingdom,
(ii)
the individual used the money to acquire an interest in
residential property in the United Kingdom, and
(iii)
repayment of the debt for the money (“the debt”) was secured
on that interest.
30
      (2)
Relevant foreign income of the individual used outside the United Kingdom
before 6 April 2028 to pay interest on the debt is treated as not remitted to
the United Kingdom.
      (3)
If, at any time on or after 12 March 2008—
(a)
any term upon which the loan was made is varied or waived,
35
(b)
the debt ceases to be secured on the interest referred to in sub-
paragraph (1)(c),
(c)
any other debt is secured on that interest, or
(d)
the interest ceases to be owned by the individual,

sub-paragraph (2) does not apply in relation to relevant foreign income used
40
as mentioned there after that time.
      (4)
If—
(a)
before 12 March 2008, money was lent to the individual outside the
United Kingdom (“the subsequent loan”),
(b)
the subsequent loan was made for the purpose of enabling the
45
individual to repay—
(i)
the loan mentioned in sub-paragraph (1), or

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
199

(ii)
another loan in relation to which sub-paragraphs (2) and (3)
apply (by virtue of this sub-paragraph),

and for no other purpose, and
(c)
before 6 April 2008—
(i)
the money was received in the United Kingdom,
5
(ii)
the individual used the money to repay the loan referred to
in paragraph (b)(i) or (ii), and
(iii)
repayment of the subsequent loan was secured on the interest
referred to in sub-paragraph (1)(c),

sub-paragraphs (2) and (3) apply in relation to the subsequent loan (and for
10
this purpose references there to the debt or the loan are to be read as
references to the subsequent loan).
      (5)
In this paragraph “residential property” has the same meaning as in Part 4
of FA 2003 (see section 116 of that Act).
91    (1)
This paragraph applies in relation to employment-related securities if—
15
(a)
the date of the acquisition is on or after 6 April 2008 and on or before
31 July 2008, and
(b)
Chapter 2 of Part 7 of ITEPA 2003 (restricted securities) applies in
relation to the securities by virtue only of amendments made by this
Schedule.
20
      (2)
Section 431 of ITEPA 2003 (election for full or partial disapplication of
Chapter) has effect in relation to the employment-related securities as if in
subsection (5)(b) for “more than 14 days after the acquisition” there were
substituted “after 14 August 2008”.
Part 2
25
Non-resident companies and trusts etc
Offshore income gains
92
In section 761 of ICTA (charge to income tax or corporation tax of offshore
income gain), for subsection (5) substitute—
“(5)
Subsections (1)(b) and (1A) are subject to section 762ZB (income
30
treated as arising: non-UK domiciled individuals to whom
remittance basis applies).”
93    (1)
Section 762 of that Act (offshore income gains accruing to persons resident
or domiciled abroad) is amended as follows.
      (2)
In subsection (1), after paragraph (a) insert—
35
“(aa)
any reference to anything accruing is to be read as a reference
to it arising (and similar references are to be read
accordingly);”.
      (3)
For subsections (2) to (5) substitute—
“(2)
If—
40
(a)
offshore income gains arise to the trustees of a settlement in a
tax year, and
(b)
section 87 of the 1992 Act (gains of non-resident settlements)
applies to the settlement for that year,

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Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
200


the OIG amount for the settlement for that year is the amount of the
offshore income gains.
(3)
Sections 87, 87A, 87C to 90 and 96 to 98 of, and Schedule 4C to, the
1992 Act apply in relation to OIG amounts as if—
(a)
references to section 2(2) amounts (except those in paragraph
5
7B(2)(b) and (4) of Schedule 4C) were to OIG amounts,
(b)
references to chargeable gains (except the one in paragraph
1(5) of Schedule 4C) were to offshore income gains,
(c)
references to anything accruing were to it arising (and similar
references, except the one in paragraph 1(5) of Schedule 4C,
10
were read accordingly), and
(d)
sections 87(4), 88(2) to (5), 89(4) and 97(6) and paragraphs
1(3A), 3 to 7, 8AA, 12 and 13 of Schedule 4C were omitted.
(4)
Section 87A of the 1992 Act applies for a tax year by virtue of
subsection (3) before it applies for that year otherwise than by virtue
15
of that subsection.
(5)
If, by virtue of subsection (1) or (3), offshore income gains are treated
as arising to a person, for the purposes of section 761 as it applies in
relation to the offshore income gains treat the person as having made
the disposal in question.”
20
      (4)
In subsection (6)—
(a)
for “subsection (2) above” substitute “(3)”,
(b)
for “accrued” substitute “arisen”, and
(c)
omit “Chapter 2 of Part 13 of ITA 2007 or”.
94
After that section insert—
25
“762ZA
Offshore income gains: application of transfer of assets abroad
provisions
(1)
Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) applies in
relation to an offshore income gain arising to a person resident or
domiciled outside the United Kingdom (and not resident or
30
ordinarily resident in the United Kingdom) as if the offshore income
gain were income becoming payable to the person.
(2)
Income treated as arising under that Chapter by virtue of subsection
(1) is regarded as “foreign” for the purposes of section 726, 730 or 735
of that Act.
35
(3)
Subsection (1) does not apply in relation to an offshore income gain
if (and to the extent that) it is treated, by virtue of section 762(1), as
arising to a person resident or ordinarily resident in the United
Kingdom.
(4)
The following provisions apply if section 762(2) applies in relation to
40
an offshore income gain (“the relevant offshore income gain”).
(5)
If—
(a)
by virtue of section 762(3) an offshore income gain is treated
as arising in a tax year to a person resident or ordinarily
resident in the United Kingdom, and
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
201

(b)
it is so treated by reason of the relevant offshore income gain
(or part of it),

for that and subsequent tax years subsection (1) does not apply in
relation to the relevant offshore income gain (or that part).
(6)
If, by virtue of subsection (1) as it applies in relation to the relevant
5
offshore income gain, income is treated under Chapter 2 of Part 13 of
ITA 2007 as arising in a tax year, reduce (with effect from the
following tax year) the OIG amount in question by the amount of the
income.
762ZB
Income treated as arising under section 761(1): remittance basis
10
(1)
This section applies to income treated as arising under section 761(1)
to an individual in a tax year if—
(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
15
year.
(2)
Treat the income as relevant foreign income of the individual.
(3)
For the purposes of sections 809L to 809R of ITA 2007 (meaning of
“remitted to the United Kingdom” etc)—
(a)
treat any consideration obtained on the disposal of the asset
20
as deriving from the income, and
(b)
unless the consideration so obtained is of an amount equal to
the market value of the asset, treat the asset as deriving from
the income.
(4)
In subsection (3)—
25
(a)
“the asset” means the asset the disposal of which causes the
income to be treated as arising, and
(b)
“the disposal” means the disposal mentioned in paragraph
(a).”
95
In Schedule 10 to TCGA 1992 (consequential amendments), omit paragraph
30
14(47)(c) and (48)(b) to (d).
96
In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”),
after paragraph (a) insert—
“(aa)
section 762ZB(2) of ICTA (offshore income gains),”.
97
In section 734 of ITA 2007 (reduction in amount charged: previous capital
35
gains tax charge), after subsection (4) insert—
“(5)
References in this section to chargeable gains treated as accruing to
an individual include offshore income gains treated as arising to the
individual (see section 762 of ICTA).”
Offshore income gains: commencement etc
40
98
The amendments made by paragraphs 92 to 97 have effect for the tax year
2008-09 and subsequent tax years.
99
Paragraph 120 and 121 applies in relation to offshore income gains as if—
(a)
references to section 2(2) amounts were to OIG amounts,

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
202

(b)
references to chargeable gains were to offshore income gains,
(c)
Step 1 of paragraph 120(2) provided that OIG amounts are to be
calculated in accordance with—
(i)
section 762(2) of ICTA (the reference in the second sentence
of that Step to section 87(4) of TCGA 1992 being read as a
5
reference to section 762(2) of ICTA), or
(ii)
section 87(5) of TCGA 1992 as applied by section 762(3) of
ICTA.
100   (1)
This paragraph applies if—
(a)
by virtue of section 87 or 89(2) of, or Schedule 4C to, TCGA 1992 as
10
applied by section 762 of ICTA, income is treated under section 761
of ICTA as arising to an individual in the tax year 2008-09 or any
subsequent tax year, and
(b)
the individual is not domiciled in the United Kingdom in that year.
      (2)
The individual is not charged to income tax on the income if and to the
15
extent that it is treated as arising by reason of—
(a)
a capital payment received (or treated as received) by the individual
before 6 April 2008, or
(b)
the matching of any capital payment with the OIG amount for the tax
year 2007-08 or any earlier tax year.
20
101   (1)
This paragraph applies if—
(a)
the trustees of a settlement have made an election under paragraph
127(1) (re-basing election),
(b)
income is treated under section 761 of ICTA as arising to an
individual in the tax year 2008-09 or any subsequent tax year (“the
25
relevant tax year”) by reason of the matching, under section 87A of
TCGA 1992 as applied by section 762 of ICTA, of an OIG amount
with a capital payment received by the individual from the trustees,
and
(c)
the individual is resident or ordinarily resident, but not domiciled, in
30
the United Kingdom in the relevant tax year.
      (2)
The individual is not charged to income tax on so much of the income as
exceeds the relevant proportion of that income.
      (3)
Sub-paragraphs (9) to (18) of paragraph 127 (meaning of “the relevant
proportion”) apply for the purposes of sub-paragraph (2) above as if—
35
(a)
references to section 2(2) amounts were to OIG amounts,
(b)
references to chargeable gains were to offshore income gains,
(c)
references to allowable losses were omitted, and
(d)
references to anything accruing were to it arising (and similar
references were read accordingly).
40
102   (1)
This paragraph applies if—
(a)
in the tax year 2008-09 or any subsequent tax year, the trustees of a
settlement (“the transferor settlement”) transfer all or part of the
settled property to the trustees of another settlement (“the transferee
settlement”),
45
(b)
section 90 of TCGA 1992 applies in relation to the transfer,
(c)
the trustees of the transferor settlement have made an election under
paragraph 127(1),

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
203

(d)
by virtue of the matching (under section 87A of TCGA 1992 as
applied by section 762 of ICTA) of a capital payment with an OIG
amount of the transferee settlement, income is treated under section
761 of ICTA as arising to an individual in a tax year (“the relevant tax
year”), and
5
(e)
the individual is resident or ordinarily resident, but not domiciled, in
the United Kingdom in the relevant tax year.
      (2)
If paragraph 101 applies in relation to the transferee settlement, paragraph
127(7) as applied by paragraph 101(3) has effect as if the reference there to
relevant assets included relevant assets within the meaning of paragraph
10
128(4) (as modified by sub-paragraph (4)(b) below).
      (3)
If paragraph 101 does not apply in relation to the transferee settlement, the
individual is not charged to income tax on so much of the income mentioned
in sub-paragraph (1)(d) above as exceeds the relevant proportion of that
income.
15
      (4)
Sub-paragraphs (4) to (7) of paragraph 128 (meaning of “the relevant
proportion”) apply for the purposes of sub-paragraph (3) above as if—
(a)
references section 2(2) amounts were to OIG amounts,
(b)
references to chargeable gains were to offshore income gains, and
(c)
references to anything accruing were to it arising.
20
Attribution of gains to members of non-resident companies
103
In section 13(2) of TCGA 1992 (attribution of gains to members of non-
resident companies), for the words from “, who, if” to “and who” substitute
“and”.
104
After section 14 of that Act insert—
25
“14A
Section 13: non-UK domiciled individuals
(1)
This section applies if—
(a)
by virtue of section 13, part of a chargeable gain that accrues
to a company on the disposal of an asset is treated as accruing
to an individual in a tax year, and
30
(b)
the individual is not domiciled in the United Kingdom in that
year.
(2)
The part of the chargeable gain treated as accruing to the individual
(“the deemed chargeable gain”) is a foreign chargeable gain within
the meaning of section 12 if (and only if) the asset is situated outside
35
the United Kingdom.
(3)
For the purposes of sections 809L to 809R of ITA 2007 (meaning of
“remitted to the United Kingdom” etc)—
(a)
treat any consideration obtained by the company on the
disposal of the asset as deriving from the deemed chargeable
40
gain, and
(b)
unless the consideration so obtained is of an amount equal to
the market value of the asset, treat the asset as deriving from
the deemed chargeable gain.
(4)
If—
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
204

(a)
the deemed chargeable gain is a foreign chargeable gain
(within the meaning of section 12),
(b)
section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to the individual for the year mentioned in subsection
(1), and
5
(c)
any of the deemed chargeable gain is remitted to the United
Kingdom in a tax year after that year,

the chargeable gain treated under section 12(2) as accruing may not
be reduced or extinguished under section 13(8).”
105
The amendments made by paragraphs 103 and 104 have effect in relation to
10
chargeable gains accruing on or after 6 April 2008.
Attribution of gains to beneficiaries
106
TCGA 1992 is amended as follows.
107
In section 85(11) (disposal of interests in non-resident settlements), for the
words from “there would” to the end substitute “chargeable gains would be
15
treated under section 89(2) or paragraph 8 of Schedule 4C as accruing in the
following year of assessment to a beneficiary who received a capital
payment from the trustees of the settlement in that year.”
108
For section 87 substitute—
“87
Non-UK resident settlements: attribution of gains to beneficiaries
20
(1)
This section applies to a settlement for a tax year (“the relevant tax
year”) if the trustees are neither resident nor ordinarily resident in
the United Kingdom in that year.
(2)
Chargeable gains are treated as accruing in the relevant tax year to a
beneficiary of the settlement who has received a capital payment
25
from the trustees in the relevant tax year or any earlier tax year if all
or part of the capital payment is matched (under section 87A as it
applies for the relevant tax year) with the section 2(2) amount for the
relevant tax year or any earlier tax year.
(3)
The amount of chargeable gains treated as accruing is equal to—
30
(a)
the amount of the capital payment, or
(b)
if only part of the capital payment is matched, the amount of
that part.
(4)
The section 2(2) amount for a settlement for a tax year for which this
section applies to the settlement is—
35
(a)
the amount upon which the trustees of the settlement would
be chargeable to tax under section 2(2) for that year if they
were resident and ordinarily resident in the United Kingdom
in that year, or
(b)
if section 86 applies to the settlement for that year, the
40
amount mentioned in paragraph (a) minus the total amount
of chargeable gains treated under that section as accruing in
that year.
(5)
The section 2(2) amount for a settlement for a tax year for which this
section does not apply to the settlement is nil.
45