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
219

(b)
if only part of the capital payment is matched, the amount
of that part.
      (3)
Section 87A applies for a tax year for the purposes of matching
capital payments received from the trustees of a relevant
settlement with section 2(2) amounts in the Schedule 4C pool as
5
if—
(a)
references to section 2(2) amounts were to section 2(2)
amounts in the Schedule 4C pool,
(b)
references to a capital payment received from the trustees
by a beneficiary were to a capital payment received from
10
the trustees of a relevant settlement by a beneficiary who is
chargeable to tax for that year, and
(c)
for section 87A(3)(b) there were substituted—
“(b)
all section 2(2) amounts in the Schedule 4C pool have
been reduced to nil.”
15
      (4)
Section 87A applies for a tax year by virtue of this paragraph
before it applies for that year otherwise than by virtue of this
paragraph; but this is subject to sub-paragraph (5).
      (5)
If section 87A applies for a tax year by virtue of section 762(3) of
the Taxes Act (offshore income gains), it applies for that year by
20
virtue of that provision before it applies for that year by virtue of
this paragraph.”
140
After paragraph 8A insert—
“Attribution of gains: remittance basis
8AA
Section 87B (remittance basis) applies in relation to chargeable
25
gains treated under paragraph 8 as accruing as it applies in
relation to chargeable gains treated under section 87 as accruing.”
141
Omit paragraphs 8B and 8C (including the heading before paragraph 8B).
142
For paragraph 9 (and the heading before it) substitute—
“Attribution of gains: disregard of certain capital payments
30
9     (1)
For the purposes of paragraph 8 (and section 87A as it applies for
the purposes of that paragraph), no account is to be taken of a
capital payment to which any of sub-paragraphs (2) to (4) applies
(or a part of a capital payment to which sub-paragraph (4)
applies).
35
      (2)
This sub-paragraph applies to a capital payment received before
the tax year preceding the tax year in which the original transfer is
made.
      (3)
This sub-paragraph applies to a capital payment that—
(a)
is received by a beneficiary of a settlement from the
40
trustees in a tax year during the whole of which the
trustees—
(i)
are resident and ordinarily resident in the United
Kingdom, and
(ii)
are not Treaty non-resident,
45

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
220

(b)
was made before any transfer of value to which Schedule
4B applies was made, and
(c)
was not made in anticipation of the making of any such
transfer of value or of chargeable gains accruing under that
Schedule.
5
      (4)
This sub-paragraph applies to a capital payment if (and to the
extent that) it is received (or treated as received) in a tax year from
the trustees by a company that—
(a)
is not resident in the United Kingdom in that year, and
(b)
would be a close company if it were resident in the United
10
Kingdom,

(and is not treated under any of subsections (3) to (5) of section 96
as received by another person).”
143
In paragraph 10 (residence of trustees from whom capital payment
received)—
15
(a)
in sub-paragraph (1) for “sub-paragraph (2) below” substitute
“paragraph 9(3)”, and
(b)
omit sub-paragraphs (2) and (3).
144   (1)
Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended
as follows.
20
      (2)
For sub-paragraphs (1) to (3) substitute—
    “(1)
This paragraph applies if—
(a)
by virtue of section 10A, an amount of chargeable gains
within section 86(1)(e) that accrued in an intervening year
to the trustees of a settlement would be treated as accruing
25
to a person (“the settlor”) in the year of return, and
(b)
after paragraph 8 has applied for the year of return, the
section 2(2) amount for the intervening year that is in the
Schedule 4C pool for the settlement is less than the amount
mentioned in paragraph (a).
30
      (2)
The amount of chargeable gains treated as mentioned in sub-
paragraph (1)(a) as accruing to the settlor in the year of return is
limited to the section 2(2) amount referred to in sub-paragraph
(1)(b).”
145
In paragraph 12A(3), for “87(4)” substitute “87(2)”.
35
146   (1)
Paragraph 13 (increase in tax payable under this Schedule) is amended as
follows.
      (2)
For sub-paragraph (1) substitute—
    “(1)
This paragraph applies if—
(a)
chargeable gains are treated under paragraph 8 as accruing
40
to a beneficiary by virtue of the matching (under section
87A) of all or part of a capital payment with the section 2(2)
amount for a tax year (“the relevant tax year”), and
(b)
the beneficiary is charged to tax by virtue of the matching.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
221

     (1A)
Where part of a capital payment is matched, references in sub-
paragraphs (2) and (3) to the capital payment are to the part
matched.”
      (3)
In sub-paragraph (5)(a), for the words from “year of assessment” to the end
(excluding the “and”) substitute “tax year immediately after the relevant tax
5
year,”.
147
Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.
Attribution of gains to beneficiaries in cases involving transfers of value: commencement etc
148
The amendments made by paragraphs 129 to 147 have effect in relation to
transfers of value to which Schedule 4B to TCGA 1992 applies that are made
10
on or after 6 April 2008.
149
For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 (and section
87A of that Act as it applies for the purposes of that paragraph), no account
is to be taken of any capital payment received before 21 March 2000.
150
A capital payment received before 6 April 2008 is not within paragraph 9(4)
15
of Schedule 4C to TCGA 1992 (if it otherwise would be).
151
Paragraph 125 applies in relation to chargeable gains treated under
paragraph 8 of Schedule 4C to TCGA 1992 as accruing as it applies in
relation to chargeable gains treated under section 87 as accruing.
152   (1)
This paragraph applies for the tax year 2008-09 or any subsequent tax year
20
(“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 a settlement on or after 12
March 2008 but before 6 April 2008, and
25
(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 paragraph 8 of Schedule 4C to TCGA 1992 as it applies
for the relevant tax year (and section 87A of that Act as it applies for those
purposes), no account is to be taken of the capital payment.
30
Attribution of gains to beneficiaries: existing Schedule 4C pools
153
Schedule 4C to TCGA 1992 (as it has effect without the amendments made
by paragraphs 129 to 147) applies for the tax year 2008-09 and subsequent
tax years in relation to Schedule 4C pools created before 6 April 2008
(“existing Schedule 4C pools”) as if paragraphs 7B and 9(2) were omitted.
35
154
Any reduction in the amount of a capital payment has effect for the purposes
of Schedule 4C to TCGA 1992 as it applies in relation to existing Schedule 4C
pools (as well as for other purposes).
155   (1)
If all of a capital payment ceases (in the tax year 2008-09 or any subsequent
tax year) to be available, the amount of the capital payment is reduced to nil.
40
      (2)
If part of a capital payment ceases (in the tax year 2008-09 or any subsequent
tax year) to be available, the amount of the capital payment is reduced by the
amount of that part.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
222

      (3)
A capital payment “ceases to be available” in a tax year if and to the extent
that, by reason of the capital payment, chargeable gains are treated under
paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to
existing Schedule 4C pools) as accruing in that year to the recipient.
      (4)
If—
5
(a)
chargeable gains are treated under paragraph 8 of Schedule 4C to
TCGA 1992 (as it has effect in relation to existing Schedule 4C pools)
as accruing in a tax year,
(b)
more than one capital payment that the beneficiary has received is
taken into account for the purposes of determining the amount of
10
chargeable gains treated as accruing to the beneficiary, and
(c)
the amount of the chargeable gains is less than the total amount of
capital payments taken into account,

sub-paragraph (3) applies in relation to earlier capital payments before later
ones.
15
156
In any tax year—
(a)
Schedule 4C to TCGA 1992 (as amended by paragraphs 129 to 147)
applies in relation to a settlement before that Schedule (as it has effect
without those amendments) applies in relation to the settlement, and
(b)
that Schedule (as it has effect without those amendments) applies in
20
relation to the settlement before section 87 or 89(2) of that Act applies
in relation to the settlement.
Transfers of securities: accrued income profits
157
In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—
(a)
omit the “and” at the end of paragraph (f), and
25
(b)
at the end of paragraph (g) insert—
“(h)
section 670A of ITA 2007 (accrued income profits),”.
158
In section 617 of ITA 2007 (accrued income profits: income charged), after
subsection (6) insert—
“(7)
Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant
30
foreign income charged on remittance basis).”
159
Omit section 644 of that Act (accrued income profits: individuals to whom
remittance basis applies).
160
After section 670 of that Act insert—
“Individuals to whom remittance basis applies
35
670A
Individuals to whom remittance basis applies
(1)
This section applies if—
(a)
accrued income profits are made by an individual as a result
of a transfer of foreign securities, and
(b)
section 809B, 809D or 809E (remittance basis) applies to the
40
individual for the tax year in which the profits are made.
(2)
Treat the accrued income profits as relevant foreign income of the
individual.

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
223

(3)
For the purposes of sections 809L to 809R (meaning of “remitted to
the United Kingdom” etc)—
(a)
if the individual is the transferor—
(i)
treat any consideration for the transfer as deriving
from the accrued income profits, and
5
(ii)
if on the transfer the individual does not receive
consideration of an amount equal to the market value
of the securities, treat the securities as deriving from
the accrued income profits, and
(b)
if the individual is the transferee, treat the securities as
10
deriving from the accrued income profits.
(4)
For the purposes of this section securities are “foreign” if income
from them would be relevant foreign income.”
161
The amendments made by paragraphs 157 to 160 have effect in relation to
transfers of securities where the settlement day is on or after 6 April 2008.
15
Transfers of assets abroad
162
In section 46B(4)(c) of TMA 1970 (questions to be determined by Special
Commissioners), for “sections 720, 727 and 731” substitute “any provision of
Chapter 2 of Part 13”.
163
In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”),
20
after paragraph (h) insert “and
(i)
sections 726, 730 and 735 of that Act (transfer of assets abroad:
foreign deemed income).”
164
ITA 2007 is amended as follows.
165
In section 720(4) (transfer of assets abroad: charge where power to enjoy
25
income), after “abroad)” insert “and section 726 (non-UK domiciled
individuals to whom remittance basis applies)”.
166
For section 726 substitute—
“726
Non-UK domiciled individuals to whom remittance basis applies
(1)
This section applies in relation to income treated under section 721 as
30
arising to an individual in a tax year (“the deemed income”) if—
(a)
section 809B, 809D or 809E (remittance basis) applies to the
individual for the year, and
(b)
the individual is not domiciled in the United Kingdom in the
year.
35
(2)
For the purposes of this section the deemed income is “foreign” if
(and to the extent that) the income mentioned in section 721(2) would
be relevant foreign income if it were the individual’s.
(3)
Treat the foreign deemed income as relevant foreign income of the
individual.
40
(4)
For the purposes of sections 809L to 809R (meaning of “remitted to
the United Kingdom” etc), treat so much of the income within section
721(2) as would be relevant foreign income if it were the individual’s
as deriving from the foreign deemed income.”

Finance Bill (Volume I)
Schedule 7 — Remittance basis
Part 2 — Non-resident companies and trusts etc
224

167
In section 727 (transfer of assets abroad: charge where capital sums
received), after subsection (3) insert—
“(3A)
But see section 730 (non-UK domiciled individuals to whom
remittance basis applies).”
168
For section 730 substitute—
5
“730
Non-UK domiciled individuals to whom remittance basis applies
(1)
This section applies in relation to income treated under section 728 as
arising to an individual in a tax year (“the deemed income”) if—
(a)
section 809B, 809D or 809E (remittance basis) applies to the
individual for the year, and
10
(b)
the individual is not domiciled in the United Kingdom in the
year.
(2)
For the purposes of this section the deemed income is “foreign” if
(and to the extent that) the income mentioned in section 728(1)(a)
would be relevant foreign income if it were the individual’s.
15
(3)
Treat the foreign deemed income as relevant foreign income of the
individual.
(4)
For the purposes of sections 809L to 809R (meaning of “remitted to
the United Kingdom” etc), treat so much of the income within section
728(1)(a) as would be relevant foreign income if it were the
20
individual’s as deriving from the foreign deemed income.”
169
In section 731 (transfer of assets abroad: charge where benefit received), after
subsection (2) insert—
“(2A)
But see section 735 (non-UK domiciled individuals to whom
remittance basis applies).”
25
170
For section 735 substitute—
“735
Non-UK domiciled individuals to whom remittance basis applies
(1)
This section applies if—
(a)
income is treated under section 732 as arising to an individual
in a tax year (“the deemed income”),
30
(b)
section 809B, 809D or 809E (remittance basis) applies to the
individual for the year, and
(c)
the individual is not domiciled in the United Kingdom in the
year.
(2)
For the purposes of this section the deemed income is “foreign” if
35
(and to the extent that) the relevant income to which it relates would
be relevant foreign income if it were the individual’s.
(3)
Treat the foreign deemed income as relevant foreign income of the
individual.
(4)
For the purposes of sections 809L to 809R (meaning of “remitted to
40
the United Kingdom” etc), treat relevant income, or a benefit, that
relates to any part of the foreign deemed income as deriving from
that part of the foreign deemed income.