Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
212

      (4)
This paragraph applies with any necessary modifications in relation to a
settlement as respects which more than one relevant transfer was made.
      (5)
In sub-paragraph (4) “relevant transfer” means a transfer—
(a)
made before 6 April 2008, and
(b)
to which section 90 of TCGA 1992 applied.
5
      (6)
If, before 6 April 2008, the trustees of the transferor or transferee settlement
made a transfer of value to which Schedule 4B to TCGA 1992 applied, this
paragraph has effect subject to such modifications as are just and reasonable
on account of Schedule 4C to that Act having applied in relation to the
settlement.
10
122   (1)
If all of a capital payment would (in the tax year 2008-09) have been left out
of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the
amount of that capital payment is reduced to nil.
      (2)
If part of a capital payment would (in the tax year 2008-09) have been left out
of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the
15
amount of that capital payment is reduced by the amount of that part.
      (3)
If—
(a)
chargeable gains were treated under section 87 or 89(2) of, or
paragraph 8 of Schedule 4C to, TCGA 1992 as accruing in the tax year
2007-08 or any earlier tax year to a beneficiary,
20
(b)
more than one capital payment that the beneficiary had received was
taken into account for the purposes of determining the amount of
chargeable gains treated as accruing to the beneficiary, and
(c)
the amount of those chargeable gains was less than the total amount
of capital payments taken into account,
25

for the purposes of this paragraph treat section 87(6) of TCGA 1992 as
originally enacted as having effect in relation to earlier capital payments
before later ones.
      (4)
References in this paragraph to section 87(6) of TCGA 1992 include that
provision as it would (but for the amendments made by this Schedule) have
30
applied by virtue of section 762(3) of ICTA (offshore income gains).
      (5)
References in this paragraph to chargeable gains include offshore income
gains.
123
Section 89(2) of TCGA 1992 as substituted applies to a settlement for the tax
year 2008-09 (and subsequent tax years) if section 89(2) of that Act as
35
originally enacted would (but for the amendments made by this Schedule)
have applied to the settlement for the tax year 2008-09.
124
In section 90(1)(a) of TCGA 1992, the reference to section 87 of TCGA 1992
includes that section as originally enacted.
125   (1)
This paragraph applies if—
40
(a)
chargeable gains are treated under section 87 or 89(2) of TCGA 1992
as accruing 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 capital gains tax on the chargeable gains if
45
and to the extent that they are treated as accruing by reason of—

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
213

(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 section 2(2) amount for
the tax year 2007-08 or any earlier tax year.
126   (1)
This paragraph applies in relation to a settlement for the tax year 2008-09 or
5
any subsequent tax year (“the relevant tax year”) if—
(a)
an individual who was resident or ordinarily resident, but not
domiciled, in the United Kingdom in the tax year 2007-08 received a
capital payment from the trustees of the settlement on or after 12
March 2008 but before 6 April 2008, and
10
(b)
the individual is resident or ordinarily resident, but not domiciled, in
the United Kingdom in the relevant tax year.
      (2)
For the purposes of sections 87 to 89 of TCGA 1992 as they apply in relation
to the settlement for the relevant tax year, no account is to be taken of the
capital payment.
15
127   (1)
The following provisions apply to a settlement if—
(a)
section 87 applies to the settlement for the tax year 2008-09, and
(b)
the trustees of the settlement have made an election under this sub-
paragraph.
      (2)
An election under sub-paragraph (1) may only be made on or before the first
20
31 January to occur after the end of the first tax year (beginning with the tax
year 2008-09) in which an event within either of the following paragraphs
occurs—
(a)
a capital payment is received (or treated as received) by a beneficiary
of the settlement, and the beneficiary is resident in the United
25
Kingdom in the tax year in which it is received, and
(b)
the trustees transfer all or part of the settled property to the trustees
of another settlement, and section 90 of TCGA 1992 applies in
relation to the transfer.
      (3)
For a tax year as respects which the settlement has a Schedule 4C pool, the
30
reference in sub-paragraph (2)(a) above to a capital payment received (or
treated as received) by a beneficiary of the settlement is to be read as a capital
payment received (or treated as received) by a beneficiary of a relevant
settlement from the trustees of a relevant settlement.
      (4)
Paragraph 8A of that Schedule (relevant settlements) applies for the
35
purposes of sub-paragraph (3) above.
      (5)
An election under sub-paragraph (1) is irrevocable.
      (6)
An election under that sub-paragraph must be made in the way and form
specified by the Commissioners for Her Majesty’s Revenue and Customs.
      (7)
Sub-paragraph (8) applies if—
40
(a)
by virtue of the matching of a capital payment with the section 2(2)
amount for the settlement for the tax year 2008-09 or any subsequent
tax year (“the relevant tax year”), chargeable gains are treated under
section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992
as accruing to an individual in a tax year, and
45
(b)
the individual is resident, but not domiciled, in the United Kingdom
in that year.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
214

      (8)
The individual is not charged to capital gains tax on so much of the
chargeable gains as exceeds the relevant proportion of those gains.
      (9)
The relevant proportion is—

where—
A is what would be the section 2(2) amount for the settlement for the
5
relevant tax year, if immediately before 6 April 2008 every relevant
asset had been sold by the trustees (or the company concerned) and
immediately re-acquired by them (or it) at the market value at that
time, and
B is the section 2(2) amount for the settlement for the relevant tax year.
10
     (10)
For the purposes of sub-paragraph (9) an asset is a “relevant asset” if—
(a)
by reason of the asset, a chargeable gain or allowable loss accrues to
the trustees in the relevant tax year, and
(b)
the asset has been comprised in the settlement from the beginning of
6 April 2008 until the time of the event giving rise to the chargeable
15
gain or allowable loss.
     (11)
For those purposes, an asset is also a “relevant asset” if—
(a)
by reason of the asset, chargeable gains are treated under section 13
of TCGA 1992 as accruing to the trustees in the relevant tax year,
(b)
the company to whom the chargeable gains actually accrue has
20
owned the asset from the beginning of 6 April 2008 until the time of
the event giving rise to those chargeable gains, and
(c)
had the company disposed of the asset at any time in the relevant
period, part of the chargeable gains (if any) accruing on the disposal
would have been treated under section 13 of TCGA 1992 as accruing
25
to the trustees.
     (12)
In sub-paragraph (11)(c) “the relevant period” means the period beginning
at the beginning of 6 April 2008 and ending immediately before the event
giving rise to the chargeable gains.
     (13)
If—
30
(a)
by reason of an asset which would not otherwise be a relevant asset
(“the new asset”), chargeable gains or allowable losses accrue, or are
treated under section 13 as accruing, to the trustees in the relevant
tax year,
(b)
the value of the new asset derives wholly or in part from another
35
asset (“the original asset”), and
(c)
section 43 of TCGA 1992 applies in relation to the calculation of the
chargeable gains or allowable losses,

the new asset (or part of that asset) is a “relevant asset” if the condition in
sub-paragraph (10)(b) or the conditions in sub-paragraph (11)(b) and (c)
40
would be met were the references there to the asset to be read as references
to the new asset or the original asset.
     (14)
If—
(a)
on or after 6 April 2008, a company (“company A”) disposes of an
asset to another company (“company B”), and
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
215

(b)
section 171 of TCGA (transfers within groups) (as applied by section
14(2) of that Act) applies in relation to the disposal,

for the purposes of sub-paragraph (11) (and this sub-paragraph) treat
company B as having owned the asset throughout the period when
company A owned it.
5
     (15)
If an asset is a relevant asset by virtue of sub-paragraph (14), for the
purposes of sub-paragraph (9)—
(a)
treat the chargeable gains as having accrued to the company which
owned the asset at the beginning of 6 April 2008, and
(b)
treat the proportion of those chargeable gains attributable under
10
section 13 of TCGA 1992 to the trustees as being the proportion of the
chargeable gains actually accruing that are so attributable.
     (16)
If—
(a)
an asset would otherwise be a “relevant asset” within sub-paragraph
(11), and
15
(b)
the proportion of chargeable gains treated under section 13 of TCGA
1992 as accruing to the trustees by reason of the asset (“the relevant
proportion”) is greater than the minimum proportion,

for the purposes of sub-paragraph (9) treat the appropriate proportion of the
asset as a relevant asset and the rest of the asset as if it were not a relevant
20
asset.
     (17)
“The minimum proportion” is the smallest proportion of chargeable gains (if
any) that would have been attributable to the trustees on a disposal of the
asset at any time in the relevant period (as defined by sub-paragraph (12)).
     (18)
“The appropriate proportion” is the minimum proportion divided by the
25
relevant proportion.
128   (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
30
settlement”),
(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),
(d)
by virtue of the matching of a capital payment with the section 2(2)
35
amount for the transferee settlement for the tax year 2008-09 or any
subsequent tax year (“the relevant tax year”), chargeable gains are
treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to,
TCGA 1992 as accruing to an individual in a tax year, and
(e)
the individual is resident, but not domiciled, in the United Kingdom
40
in that year.
      (2)
If the trustees of the transferee settlement have made an election under
paragraph 127(1), paragraph 127(7) to (9) have effect in relation to the
transferee settlement for that year as if the reference in paragraph 127(9) to
relevant assets included relevant assets within the meaning of this
45
paragraph.
      (3)
If the trustees of the transferee settlement have not made an election under
paragraph 127(1), the individual is not charged to capital gains tax on so

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
216

much of the chargeable gains mentioned in sub-paragraph (1)(d) above as
exceeds the relevant proportion of those gains.
      (4)
The relevant proportion is—

where—
A is what would be the section 2(2) amount for the transferee
5
settlement for the relevant tax year, if immediately before 6 April
2008 every relevant asset had been sold by the company concerned
and immediately re-acquired by it at the market value at that time,
and
B is the section 2(2) amount for the transferee settlement for the relevant
10
tax year.
      (5)
For the purposes of this paragraph an asset is a “relevant asset” if—
(a)
by reason of the asset, chargeable gains are treated under section 13
of TCGA 1992 as accruing to the trustees of the transferee settlement
in the relevant tax year,
15
(b)
the company to whom the chargeable gains actually accrue has
owned the asset from the beginning of 6 April 2008 until the time of
the event giving rise to those chargeable gains,
(c)
had the company disposed of the asset at any time in the relevant
period, part of the chargeable gains (if any) accruing on the disposal
20
would have been treated under section 13 of TCGA 1992 as accruing
to—
(i)
the trustees of the transferor settlement (if the disposal had
been made before the transfer), or
(ii)
the trustees of the transferee settlement (if it had not).
25
      (6)
In sub-paragraph (5)(c) “the relevant period” means the period beginning at
the beginning of 6 April 2008 and ending immediately before the event
giving rise to the chargeable gains.
      (7)
Sub-paragraphs (13) to (18) of paragraph 127 apply for the purposes of this
paragraph (with such modifications as are necessary) as they apply for the
30
purposes of that paragraph.
Attribution of gains to beneficiaries: cases involving transfers of value
129
TCGA 1992 is amended as follows.
130
In section 85A (transfers of value: attribution of gains to beneficiaries and
treatment of losses)—
35
(a)
after subsection (2) insert—
“(2A)
For the purposes of sections 87 to 89, no account is to be taken
of any section 2(2) amount in a Schedule 4C pool (see
paragraph 1 of Schedule 4C).”, and
(b)
for subsection (3) substitute—
40
“(3)
When calculating the section 2(2) amount for a settlement for
a tax year (within the meaning of section 87), no account is to
be taken of any chargeable gains or allowable losses accruing
by virtue of Schedule 4B.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
217


Nothing in this subsection affects any increase in a section
2(2) amount by virtue of paragraph 1(3A) or 7B(2)(b) of
Schedule 4C.”
131
In paragraph 3 of Schedule 4B (transfers of value by trustees linked with
trustee borrowing: settlements), for sub-paragraph (4) substitute—
5
    “(4)
A settlement is “within section 87” for a tax year if—
(a)
section 87 applies to the settlement for that year, or
(b)
chargeable gains would be treated under section 89(2) as
accruing in that year to a beneficiary who received a capital
payment from the trustees of the settlement in that year.
10
      (5)
The reference in subsection (4)(b) to chargeable gains treated as
accruing includes offshore income gains treated as arising.”
132
Schedule 4C (transfers of value: attribution of gains to beneficiaries) is
amended as follows.
133
In paragraph 1, for sub-paragraphs (2) and (3) substitute—
15
    “(2)
The transferor settlement is regarded for the purposes of this
Schedule as having a “Schedule 4C pool”.
      (3)
The Schedule 4C pool contains the section 2(2) amounts for the
settlement that are outstanding at the end of the tax year in which
the original transfer is made (see paragraph 1A).
20
     (3A)
The section 2(2) amount for that tax year is increased by—
(a)
the amount of Schedule 4B trust gains accruing by virtue of
the original transfer (see paragraphs 3 to 7), and
(b)
the total amount of any further Schedule 4B trust gains
accruing by virtue of any further transfers of value to
25
which that Schedule applies that are made by the trustees
in that tax year.”
134
After that paragraph insert—
“Outstanding section 2(2) amounts
1A    (1)
The following steps are to be taken for the purpose of calculating
30
the section 2(2) amounts for a settlement that are outstanding at
the end of a tax year (“the relevant tax year”).

Step 1

Find the section 2(2) amount for the settlement for the relevant tax
year and earlier tax years, as reduced under section 87A as it
35
applies for the relevant tax year and earlier tax years.

Step 2

This Step applies if, by virtue of the matching of the section 2(2)
amount for the settlement for a tax year (“the applicable year”)
with a capital payment, chargeable gains are treated under section
40
87 or 89(2) as accruing in the relevant tax year to a beneficiary who
is not chargeable to tax for that year.

Increase the section 2(2) amount for the applicable year (found
under Step 1) by the amount of the chargeable gains.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
218

      (2)
For the purposes of Step 1 of sub-paragraph (1) take into account
the effect of section 90 in relation to any transfer of settled property
from or to the trustees of the settlement made in or before the
relevant tax year.
      (3)
For the purposes of this Schedule a beneficiary is “chargeable to
5
tax” for a tax year if the beneficiary is resident or ordinarily
resident in the United Kingdom in that year.”
135
In paragraph 4(2) (chargeable amount: non-resident settlement), at the end
insert “(and had made the disposals which Schedule 4B treats them as
having made)”.
10
136
In paragraph 5(2)(a) (chargeable amount: dual resident settlement), after
“apply” insert “(and the disposals which Schedule 4B treats them as having
made were made)”.
137
Omit paragraph 7A (and the heading before it).
138
For paragraph 7B substitute—
15
“7B   (1)
This paragraph applies if the trustees of the transferor settlement
make a further transfer of value to which Schedule 4B applies in a
tax year (“the year of the transfer”) after the tax year mentioned in
paragraph 1(3).
      (2)
If the settlement has a Schedule 4C pool at the beginning of the
20
year of the transfer—
(a)
the section 2(2) amounts in the Schedule 4C pool are
increased by the section 2(2) amounts for the settlement
that are outstanding at the end of the year of the transfer,
and
25
(b)
the section 2(2) amount in the pool for the year of transfer
is increased (or further increased) by the amount of
Schedule 4B trust gains accruing by virtue of the further
transfer.
      (3)
If the settlement does not have a Schedule 4C pool at the beginning
30
of the year of the transfer, this Schedule applies in relation to the
further transfer as it applied in relation to the original transfer.
      (4)
For the purposes of this paragraph a settlement has a Schedule 4C
pool until the end of the tax year in which all section 2(2) amounts
in the pool have been reduced to nil.”
35
139
For paragraph 8 substitute—
“8    (1)
Chargeable gains are treated as accruing in a tax year (“the
relevant tax year”) to a beneficiary who has received a capital
payment from the trustees of a relevant settlement in the relevant
tax year or any earlier tax year if all or part of the capital payment
40
is matched (under section 87A as it applies for the relevant tax
year) with the section 2(2) amount in the Schedule 4C pool for the
relevant tax year or any earlier tax year.
      (2)
The amount of chargeable gains treated as accruing is equal to—
(a)
the amount of the capital payment, or
45