Finance Bill


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The Chairman: Order. I intend to suspend the sitting until 4.30 pm for a health break, a tea break and so that hon. Members can attend to any other matters.
3.57 pm
Sitting suspended.
4.30 pm
On resuming—
The Chairman: I hope that everyone feels a little better as a result of that break. I certainly do. I am right on top of things again, so watch out.
Mr. Hands: I shall be brief, Sir Nicholas, but may I start by welcoming you to this extended sitting? I shall make a couple of general comments. I do not believe that there will be a stand part debate, but after our debate on the schedule I am struck by the number of Government amendments that were tabled. My hon. Friend the Member for Fareham counted 60, but I think it is only 59. We are embarking on something very dangerous. There is an almost unbelievable level of complexity involved in some of those amendments, particularly in amendments Nos. 402A, 404 and 406. I am worried about the possible effect, not only on the City of London, but on London as a whole.
My constituency contains the second highest proportion of residents born outside the UK. The highest is in Kensington and Chelsea. I am worried about the effect of the schedule, the Bill and these 59 or 60 Government amendments. One third of my constituents are foreign-born. It is not just a finance issue. I believe that skilled and semi-skilled labourers will struggle with these new regulations, both in their complexity and their possible effect.
It still worries me that no real answers have been provided to the questions posed by the IFS last October about how much money is involved, how many non-domiciles there are, and the numbers who might emigrate as a result. From what we have seen this afternoon, if anything, the Government proposals are becoming ever more complicated. The situation in the UK economy and in the City of London economy is extremely delicate. I urge the Government in the remaining stages of this Bill to think carefully about the impact, not only of the 60 Government amendments, but of the whole set of regulations they are proposing, on my constituents and on the wider London economy.
Jane Kennedy: We have readjusted, in this modest group of amendments, the interaction between trusts and offshore income gains. I would be the first to admit that this is one of the most complex parts of a complex area of tax law that I have had a rapid lesson in learning. I would not pretend to be an expert. It is no surprise to me that this area of tax law generates its own industry in terms of advice. It is important not to confuse the complexity of the legislation with the way that it will apply to individual cases through the self-assessment system. Not to make the amendments that we are proposing would be a very great disadvantage to the UK. The amendments themselves have arisen from close and detailed discussions between HMRC, the Treasury and experts in this field of law. I take a great deal of comfort from the knowledge that they have done so.
The Bill, as drafted, changes the interaction between trusts and offshore income gains. Except in limited circumstances, it has the effect of denying the benefit of rebasing offshore income gains to the market value as at 6 Apri 2008. Our amendments restore the previous relationship between trusts and offshore income gains, so that rebasing on offshore income gains would be more widely accessible. It would be fair to concede that our proposals went much wider than we intended when the detail of the clauses become available, and when we received the response to them. I should add that the rules relating to offshore income gains will be translated into regulations next year, so there will be an opportunity for interested parties to make further representations on the rules over the next few months.
We have made a number of changes to the way in which the rebasing rules for trusts work. Those changes extend the application of rebasing to situations in which the trustee’s interest in a company have decreased since 6 April 2008, or in which an asset held at 6 April 2008 has been modified since then. Amendments No. 390, 391 and 494 seek to apply the same treatment to offshore companies as applies to offshore trusts. In developing our overall package of reforms, we have drawn a clear distinction between companies in which the shareholder or participator has a direct interest, and trusts, in which the beneficiary’s interest is indirect. Trusts are different from companies, and chargeable gains of non-resident trusts are taxed differently from companies. When a company is caught by the anti-avoidance measure that we are amending under schedule 7, the people who control the company are treated as though a chargeable gain to the company was their own chargeable gain.
By contrast, the beneficiaries of a trust have an indirect interest in a trust. They do not have the control of a trust that the participators of a company have, and the way that the non-chargeable gains of a non-resident trust are attributed to a beneficiary reflects that fact. Instead of looking at individual chargeable gains, as we do with companies, we look at the aggregated gains of the trust. Those are very real differences in approach between companies and trusts, and they mean that we cannot assume that what works for a trust will also work for a company or that they are in any way equivalent.
It is not the case that the proposals that we are making would, as the hon. Member for Fareham put it, “push people into more complex structures”. The rebasing rule relates to trusts that existed before April. There is no scope for benefiting from rebasing by setting up a trust now.
Mr. Hoban: I accept the Minister’s comment. The arrangement relates to transitional provisions, but the message that it sends out is that if there are complex tax structures, there is an incentive to use those structures—not necessarily in relation to the particular area that we are looking at today, but more generally. Rather than a simpler, more straightforward means of holding the house in Eaton square, or wherever it happens to be, people go down the route of that more complex structure, because there seems to be this arbitrage opportunity between a company and a trust.
Jane Kennedy: I have no reason to believe that the hon. Gentleman’s view is well founded. I have said this before, but I want to keep this area under review. I am sure that he will appreciate that the amendments have grown out of concern about the rebasing issue. If trustees elect for rebasing, they have to disclose detailed information about trust assets. It was made very clear to us during our consultation that some trustees did not want to disclose anything more about the assets that they held than they needed to. That can be achieved only by making rebasing optional. I hope that that resolves the problem that we he was probing in his amendments.
Our amendments deliver the commitment not to introduce new disclosure requirements. The practical effect of amendment No. 390 would be to exclude entirely the non-resident company’s gains from tax, where a non-domiciled individual was using a remittance basis. That would be unfair to non-domiciled individuals who use the arising basis, and non-domiciled individuals who own an asset directly, rather than through a non-resident company. Amendments Nos. 391 and 494 seek to apply rebasing to non-resident companies, the effect of which would be to offer individuals who own their own investments through offshore companies the tax re-uplift on their investments, without any clear rationale. The three amendments run counter to the overall thrust of the reform, although I appreciate that they may have been tabled to promote discussion.
Finally, amendments Nos. 397 and 398 seek to change a provision of the trust rules that was brought up by many interested parties in discussions, namely the restriction on rebasing where the trustee’s interest in a company has decreased between 6 April 2008 and the date of disposal of the asset by the company. Our amendments Nos. 439, 440, 446 and 447 respond to calls for change in that area. Our approach is different from that proposed by the hon. Gentleman, but it delivers the same effect, with the advantage of guarding against avoidance and applying to property transferred between settlements. He suggested that our amendments were more elegant than his. Our amendments are not always described as elegant, so it is good to hear it on this occasion.
This is a complex area, and there is an argument that it is worthy of detailed debate. Our brief debate has helped to clarify some of the concerns out there. In my opening comments, I could not bring myself to alert the Committee to the fact that there were 61 Government amendments in this group. I skirted over it then, so I say it now, and shall quickly sit down.
Mr. Hoban: I am grateful to the Financial Secretary for tabling 61 amendments.
I will focus on the election for rebasing. I wonder whether the issue is the right way round. Rightly, after publishing the draft legislation that gave rise to the concern about disclosure by trusts, the Government listened to that concern and responded to it. We seem to have produced a set of rules that benefited those who are particularly knowledgeable about how trusts will function. They are the very people who would be in a position to make the right decision about opting out of rebasing, if we went down the route that I proposed of automatic rebasing with the option to withdraw. I may have got the disclosure wrong in my amendments, but the Government seem to have gone a long way towards satisfying those who are very aware of the consequences and who want to manage their clients’ affairs in a particular way, without thinking about those people who are not so well advised and may not have access to trustees who are aware of the detail of UK law, so they might not recognise the importance of the rebasing election.
4.45 pm
In tackling one issue, we have created another that affects those who are not as well advised or well represented as those who made the initial representation. My only concern is that we have got the balance slightly wrong. I liked the Minister’s description of this “short” debate.
Jane Kennedy: On this group of amendments.
Mr. Hoban: I thought the Minister meant the debate that has been going on since 9 o’clock this morning. One of the things I have tried to develop throughout my remarks today has been the question of how we can ensure that the unrepresented taxpayer is not disadvantaged by these rules. We should make it easy for them to comply with them, and not create widespread non-compliance, particularly in the self-assessment system. That is the thrust of these provisions, as of others.
Jane Kennedy: I very much appreciate the point that the hon. Gentleman is making. It is a fair point, and something I will watch carefully as we go forward.
Mr. Hoban rose—
The Chairman: I call Mark Hoban.
Mr. Hoban: I was seeking to make an intervention, Sir Nicholas. I do not wish to audition to join the Chairmen’s Panel. Having listened to the Minister’s reassurances throughout the debate, I beg to ask leave to withdraw the amendment.
The Chairman: Order. The lead amendment is in fact a Government amendment, so the hon. Gentleman does not have to withdraw his amendment. I am sure that he will go far within his party, and will not need to fall back on an alternative career chairing Committees in the House.
Amendment agreed to.
Amendments made: No. 403, in schedule 7, page 187, line 32, leave out ‘(4)’ and insert ‘(5)’.
No. 404, in schedule 7, page 187, line 33, leave out from beginning to end of line 17 on page 188 and insert—
‘“(2) If—
(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,
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 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, 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 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.’.
No. 405, in schedule 7, page 188, line 18, leave out from ‘(6)’ to end and insert ‘—
(a) for “subsection (2) above” substitute “(3)”,
(b) for “accrued” substitute “arisen”, and
(c) omit “Chapter 2 of Part 13 of ITA 2007 or”.’.
No. 406, in schedule 7, page 188, leave out line 20 and insert—
‘“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 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.
(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 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
(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 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’.
No. 407, in schedule 7, page 188, leave out lines 27 to 32 and insert—
‘(2) Treat the income as relevant foreign income of the individual.’.
No. 408, in schedule 7, page 188, line 33, leave out ‘those sections’ and insert
‘sections 809K to 809Q of ITA 2007 (meaning of “remitted to the United Kingdom” etc)’.
No. 409, in schedule 7, page 188, line 45, at end insert—
‘90A 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),”.
90B In section 734 of ITA 2007 (reduction in amount charged: previous capital 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).”’.
No. 410, in schedule 7, page 189, line 1, leave out ‘90’ and insert ‘90B’.
No. 411, in schedule 7, page 189, line 2, at end insert—
‘91A Paragraph 108 or 108A applies in relation to offshore income gains as if—
(b) references to chargeable gains were to offshore income gains, and
(c) references to anything accruing were to it arising.’.
No. 412, in schedule 7, page 190, line 18, leave out ‘tax year’ and insert
‘settlement for a tax year for which this section applies to the settlement’.
No. 413, in schedule 7, page 190, line 19, after ‘trustees’ insert ‘of the settlement’.
No. 414, in schedule 7, page 190, line 25, at end insert—
‘(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.
(6) For the purposes of this section a settlement arising under a will or intestacy is treated as made by the testator or intestate at the time of death.’.
No. 415, in schedule 7, page 191, line 21, leave out from second ‘year’ to end of line 25 and insert ‘—
(a) which is before the last tax year for which Steps 1 to 4 have been undertaken, and
(b) for which the section 2(2) amount is not nil.’.
No. 416, in schedule 7, page 191, line 31, leave out ‘to which section 87 applies to the settlement’.
No. 417, in schedule 7, page 191, line 33, leave out from ‘(2)’ to end of line 36 and insert
‘is to be taken into account in any subsequent application of this section.’.
No. 418, in schedule 7, page 191, line 38, leave out from ‘applies’ to end of line 39 and insert ‘if—
(a) chargeable gains are treated under section 87 as accruing to an individual in a tax year,
(b) section 809B, 809C or 809D (remittance basis) applies to the individual for that year, and
(c) the individual is not domiciled in the United Kingdom in that year.’.
No. 419, in schedule 7, page 192, leave out lines 41 to 44.
No. 420, in schedule 7, page 193, line 15, leave out from ‘transfer)’ to ‘as’ in line 16.
No. 421, in schedule 7, page 193, leave out lines 41 to 43 and insert—
‘(9) When calculating the market value of property for the purposes of this section or section 90A in a case where the property is subject to a debt, reduce the market value by the amount of the debt.’.
No. 422, in schedule 7, page 194, line 2, at end insert—
‘90A Section 90: transfers made for consideration in money or money’s worth
(4) Deduct the amount (or value) of the consideration from the amount of the market value referred to in section 90(4)(a).’.
No. 423, in schedule 7, page 194, line 23, after ‘1998,’ insert ‘section 130(1) and (4), and’.
No. 424, in schedule 7, page 194, line 32, leave out paragraph (a).
No. 425, in schedule 7, page 194, line 40, at end insert—
‘106A (1) This paragraph applies if—
(a) section 87 of TCGA 1992 applies to a settlement for the tax year 2008-09 or any subsequent tax year (“the tax year”),
(b) the settlement was made before 17 March 1998,
(c) none of the settlors fulfilled the residence requirements when the settlement was made, and
(d) none of the settlors fulfils the residence requirements in the tax year.
(2) For the purposes of that section as it applies to the settlement for the tax year, no account is to be taken of—
(a) any gains or losses accruing to the trustees of the settlement before 17 March 1998, or
(b) any capital payments received before that date.
(3) A settlor “fulfils the residence requirements” when the settlor is—
(a) resident or ordinarily resident in the United Kingdom, and
(b) domiciled in any part of the United Kingdom.’.
No. 426, in schedule 7, page 195, leave out lines 1 to 6 and insert
‘section 87 or 89(2) of TCGA 1992 applied to it for the tax year 2007-08 or any earlier tax year.’.
No. 427, in schedule 7, page 195, line 8, leave out ‘or any earlier tax year’ and insert ‘and earlier tax years’.
No. 428, in schedule 7, page 195, line 11, leave out from ‘for’ to end of line 12 and insert
‘the settlement for the tax year 2007-08 and earlier tax years.’.
No. 429, in schedule 7, page 195, line 12, at end insert—
‘For this purpose, references in section 87(4) and (5) of TCGA 1992 (as substituted) to section 87 of that Act applying to a settlement for a tax year are to be read as references to section 87 of that Act (as it had effect before that substitution) applying to a settlement for a tax year.’.
No. 430, in schedule 7, page 195, leave out lines 18 to 20 and insert—
‘Find the earliest tax year for which the section 2(2) amount is not nil.
If the section 2(2) amount for that year is less than or equal to the total deemed gains, reduce that section 2(2) amount to nil.’.
No. 431, in schedule 7, page 195, leave out lines 28 to 31 and insert—
‘For this purpose, read references to the earliest tax year for which the section 2(2) amount is not nil as references to the earliest tax year—
(a) which is after the last tax year for which Steps 3 and 4 have been undertaken, and
(b) for which the section 2(2) amount is not nil.’.
No. 432, in schedule 7, page 195, line 31, at end insert—
‘(3) If, before 6 April 2008, the trustees of the settlement made a transfer of value to which Schedule 4B to TCGA 1992 applied, sub-paragraph (2) 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.
(4) This paragraph does not apply if section 90 of TCGA 1992 applied to a transfer of settled property by or to the trustees of the settlement that was made before 6 April 2008 (see paragraph 108A).
108A (1) If section 90 of TCGA 1992 (as originally enacted) applied to a transfer of settled property made before 6 April 2008, this paragraph applies in relation to the transferor settlement and the transferee settlement.
(2) In this paragraph “the year of transfer” means the tax year in which the transfer occurred.
(3) The following steps are to be taken for the purpose of calculating the section 2(2) amount for the transferor and transferee settlements for the tax year 2007-08 and earlier tax years.
Step 1
Take the steps in paragraph 108(2) for the purpose of calculating the section 2(2) amount (at the end of the year of transfer) for the transferor settlement for the year of transfer and earlier tax years.
For this purpose, read references there to the tax year 2007-08 as references to the year of transfer.
Step 2
Take the steps in paragraph 108(2) for the purpose of calculating the section 2(2) amount (before the year of transfer) for the transferee settlement for the tax year before the year of transfer and earlier tax years.
For this purpose, read references there to the tax year 2007-08 as references to the tax year before the year of transfer.
Step 3
Calculate the section 2(2) amount for the transferee settlement for the year of transfer.
Step 4
Treat the section 2(2) amount for the transferee settlement for the year of transfer or any earlier tax year (as calculated under Step 2 or 3) as increased by—
(a) the section 2(2) amount for the transferor settlement for that year (as calculated under Step 1), or
(b) if part only of the settled property was transferred, the relevant proportion of the amount mentioned in paragraph (a).
“The relevant proportion” here has the same meaning as in section 90(4) of TCGA 1992 (as substituted by this Schedule).
Step 5
Treat the section 2(2) amount for the transferor settlement for any tax year as reduced by the amount by which the section 2(2) amount for the transferee settlement for that year is increased under Step 4.
Step 6
Take the steps in paragraph 108(2) for the purpose of calculating the section 2(2) amount for the transferor settlement for the tax year 2007-08 and earlier tax years.
For this purpose—
(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.
(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.’.
No. 433, in schedule 7, page 195, line 32, leave out sub-paragraph (1).
No. 434, in schedule 7, page 195, line 41, after ‘of’ insert
‘, or paragraph 8 of Schedule 4C to,’.
No. 435, in schedule 7, page 196, line 3, at end insert—
‘(5) 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 applied by virtue of section 762(3) of ICTA (offshore income gains).
(6) References in this paragraph to chargeable gains include offshore income gains.
109A 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 originally enacted would (but for the amendments made by this Schedule) have applied to the settlement for the tax year 2008-09.
109B In section 90(1)(a) of TCGA 1992, the reference to section 87 of TCGA 1992 includes that section as originally enacted.’.
No. 436, in schedule 7, page 196, line 37, leave out ‘part (but not all)’ and insert ‘all or part’.
No. 437, in schedule 7, page 196, line 39, at end insert—
‘(2A) For a tax year as respects which the settlement has a Schedule 4C pool, the 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.
(2B) Paragraph 8A of that Schedule (relevant settlements) applies for the purposes of sub-paragraph (2A) above.’.
No. 438, in schedule 7, page 197, line 1, after ‘of’ insert
‘, or paragraph 8 of Schedule 4C to,’.
No. 439, in schedule 7, page 197, line 29, leave out ‘the same part (or a larger part)’ and insert ‘part’.
No. 440, in schedule 7, page 197, line 34, at end insert—
‘(11) If—
(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 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 (8)(b) or the conditions in sub-paragraph (9)(b) and (c) would be met were the references there to the asset to be read as references to the new asset or the original asset.
(12) If—
(a) on or after 6 April 2008, a company (“company A”) disposes of an asset to another company (“company B”), and
(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 (9) (and this sub-paragraph) treat company B as having owned the asset throughout the period when company A owned it.
(13) If an asset is a relevant asset by virtue of sub-paragraph (12), for the purposes of sub-paragraph (7)—
(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 section 13 of TCGA 1992 to the trustees as being the proportion of the chargeable gains actually accruing that are so attributable.
(14) If—
(a) an asset would otherwise be a “relevant asset” within sub-paragraph (9), and
(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 (7) treat the appropriate proportion of the asset as a relevant asset and the rest of the asset as if it were not a relevant asset.
(15) “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 (10)).
(16) “The appropriate proportion” is the minimum proportion divided by the relevant proportion.’.
No. 441, in schedule 7, page 197, line 46, after ‘of’ insert
‘, or paragraph 8 of Schedule 4C to,’.
No. 442, in schedule 7, page 198, line 2, at end insert—
‘(1A) If the trustees of the transferee settlement have made an election under paragraph 112(1), paragraph 112(5) to (7) have effect in relation to the transferee settlement for that year as if the reference in paragraph 112(7) to relevant assets included relevant assets within the meaning of this paragraph.’.
No. 443, in schedule 7, page 198, line 3, at beginning insert
‘If the trustees of the transferee settlement have not made an election under paragraph 112(1),’.
No. 444, in schedule 7, page 198, line 4, after first ‘gains’ insert ‘mentioned in sub-paragraph (1)(d) above’.
No. 445, in schedule 7, page 198, line 15, leave out ‘sub-paragraph (3)’ and insert ‘this paragraph’.
No. 446, in schedule 7, page 198, line 23, leave out ‘the same part (or a larger part)’ and insert ‘part’.
No. 447, in schedule 7, page 198, line 31, at end insert—
‘(6) Sub-paragraphs (11) to (16) of paragraph 112 apply for the purposes of this paragraph (with such modifications as are necessary) as they apply for the purposes of that paragraph.’.
No. 448, in schedule 7, page 198, line 35, after ‘losses)’ insert ‘—
(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) ’.
No. 449, in schedule 7, page 199, line 4, at end insert—
‘(5) The reference in subsection (4)(b) to chargeable gains treated as accruing includes offshore income gains treated as arising.”’.
No. 450, in schedule 7, page 199, line 12, after ‘the’ insert ‘original’.
No. 451, in schedule 7, page 199, line 26, leave out from second ‘for’ to first ‘as’ in line 28 and insert
‘the relevant tax year and earlier tax years,’.
No. 452, in schedule 7, page 199, line 37, at end insert—
‘(1A) 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.’.
No. 453, in schedule 7, page 199, line 40, at end insert—
‘119A 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)”.
119B 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)”.’.
No. 454, in schedule 7, page 200, leave out lines 41 and 42.
No. 455, in schedule 7, page 200, leave out lines 46 and 47.
No. 456, in schedule 7, page 201, line 3, after ‘paragraph’ insert
‘; 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 virtue of that provision before it applies for that year by virtue of this paragraph.’.
No. 457, in schedule 7, page 201, line 3, at end insert—
‘122A After paragraph 8A insert—
“Attribution of gains: remittance basis
8AA Section 87B (remittance basis) applies in relation to chargeable gains treated under paragraph 8 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.”’.
No. 458, in schedule 7, page 201, line 5, leave out paragraph 124 and insert—
‘124 For paragraph 9 (and the heading before it) substitute—
“Attribution of gains: disregard of certain capital payments
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).
(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 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,
(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.
(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 Kingdom,
(and is not treated under any of subsections (3) to (5) of section 96 as received by another person).
124A In paragraph 10 (residence of trustees from whom capital payment received)—
(a) in sub-paragraph (1) for “sub-paragraph (2) below” substitute “paragraph 9(3)”, and
(b) omit sub-paragraphs (2) and (3).’.
No. 459, in schedule 7, page 201, line 43, at end insert—
‘129A 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.
129B A capital payment received before 6 April 2008 is not within paragraph 9(4) of Schedule 4C to TCGA 1992 (if it otherwise would be).
129C Paragraph 110 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.
129D (1) This paragraph applies for the tax year 2008-09 or 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 a settlement on or after 12 March 2008 but before 6 April 2008, and
(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.’.
No. 460, in schedule 7, page 202, line 3, after ‘2008’ insert ‘(“existing Schedule 4C pools”)’.
No. 461, in schedule 7, page 202, line 3, after ‘7B’ insert ‘and 9(2)’.
No. 462, in schedule 7, page 202, line 3, at end insert—
‘130A 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).
130B (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.
(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.
(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—
(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 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.
130C In any tax year—
(a) Schedule 4C to TCGA 1992 (as amended by paragraphs 114 to 128) 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 relation to the settlement before section 87 or 89(2) of that Act applies in relation to the settlement.’.
No. 469, in schedule 7, page 202, line 7, leave out ‘, and’.
No. 470, in schedule 7, page 202, leave out lines 23 to 29 and insert—
‘(2) Treat the accrued income profits as relevant foreign income of the individual.’.
No. 471, in schedule 7, page 202, line 41, leave out ‘any’.
No. 472, in schedule 7, page 203, line 3, at end insert—
‘135A 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”.
135B In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”), after paragraph (h) insert “, and
(i) sections 726, 730 and 735 of that Act (transfer of assets abroad: foreign deemed income).”’.
No. 473, in schedule 7, page 203, leave out lines 19 to 26 and insert—
‘(3) Treat the foreign deemed income as relevant foreign income of the individual.’.
No. 474, in schedule 7, page 203, line 27, leave out ‘those sections’ and insert
‘sections 809K to 809Q (meaning of “remitted to the United Kingdom” etc)’.
No. 475, in schedule 7, page 204, leave out lines 4 to 11 and insert—
‘(3) Treat the foreign deemed income as relevant foreign income of the individual.’.
No. 476, in schedule 7, page 204, line 12, leave out ‘those sections’ and insert
‘sections 809K to 809Q (meaning of “remitted to the United Kingdom” etc)’.
No. 477, in schedule 7, page 204, leave out lines 31 to 38 and insert—
‘(3) Treat the foreign deemed income as relevant foreign income of the individual.’.
No. 478, in schedule 7, page 204, line 39, leave out ‘those sections’ and insert
‘sections 809K to 809Q (meaning of “remitted to the United Kingdom” etc)’.
No. 479, in schedule 7, page 205, line 8, leave out from ‘order’ to end of line 9 and insert ‘determined under subsection (3),’.
No. 480, in schedule 7, page 205, line 23, at end insert—
‘(3) The order referred to in subsection (1)(c) is arrived at by taking the following steps.
Step 1
Find the relevant income for the earliest tax year (of the tax years referred to in subsection (1)(c)).
Step 2
Place so much of that income as is not foreign in the order in which it arose (starting with the earliest income to arise).
Step 3
After that, place so much of that income as is foreign in the order in which it arose (starting with the earliest income to arise).
Step 4
Repeat Steps 1 to 3.
For this purpose, read references to the relevant income for the earliest tax year as references to the relevant income for the first tax year after the last tax year in relation to which those Steps have been undertaken.
(4) For the purposes of subsection (3) relevant income is “foreign” where it would be relevant foreign income if it were the individual’s.
(5) Subsection (1)(d) does not apply if the income may not be taken into account because the individual has been charged to income tax under section 731 by reason of the income.’.
No. 481, in schedule 7, page 205, line 24, leave out ‘137’ and insert ‘135A’.—[Jane Kennedy.]
Schedule 7, as amended, agreed to.
 
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