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. Amendments
Nos. 392 to 394 and amendment No. 396 would together result
in rebasing being mandatory. I dealt with that issue in my comments on
the representations we received on maintaining the option not to
disclose, as it was feared our original proposals required. Under
the hon. Gentleman’s proposals, there would be an opt-out for
trustees, with a longer deadline than we have specified and a limit on
the amount of information that HMRC could require. The amendments are
misconceived. They would not protect trustees from having to disclose
information on offshore assets. Whatever form election for rebasing
takes, trustees who use rebasing still need to disclose to HMRC
additional information about assets disposed of, to compute the gains
that will be left untaxed. Not all trustees will wish to make that
level of disclosure or to engage in the additional evaluation work
involved in rebasing, so the rebasing rules should be voluntary rather
than imposed, albeit with an opt-out. Amendment No. 394 extends the
deadline. The deadline already provides trustees with 19 months from
now to make the decision, and I see no reason to extend it as
proposed. 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.
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—
(a) references to section 2(2) amounts were to OIG
amounts, (b) references to
chargeable gains were to offshore income
gains, (c) Step 1 of paragraph
108(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 reference to section 762(2) of
ICTA), or (ii) section 87(5) of
TCGA 1992 as applied by section 762(3) of
ICTA. 91B (1) This paragraph
applies if— (a) by
virtue of section 87 or 89(2) of, or Schedule 4C to, TCGA 1992 as
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 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. 91C (1)
This paragraph applies
if— (a) the trustees of
a settlement have made an election under paragraph 112(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 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 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 (7) to (16) of paragraph 112 (meaning of “the
relevant proportion”) apply for the purposes of sub-paragraph
(2) above as if— (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). 91D (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”), (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
112(1), (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
(e) the individual is resident or ordinarily
resident, but not domiciled, in the United Kingdom in the relevant tax
year. (2) If paragraph 91C
applies in relation to the transferee settlement, paragraph 112(7) as
applied by paragraph 91C(3) has effect as if the reference there to
relevant assets included relevant assets within the meaning of
paragraph 113(4) (as modified by sub-paragraph (4)(b)
below). (3) If paragraph 91C
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. (4) Sub-paragraphs (3)
to (6) of paragraph 113 (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.’. 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
(1) Section 90 does not apply to a transfer of
settled property made for consideration in money or money’s
worth if the amount (or value) of that consideration is equal to or
exceeds the market value of the property
transferred. (2) The following
provisions apply if— (a)
section 90 applies to a transfer of settled property made for
consideration in money or money’s worth,
and (b) the amount (or value)
of that consideration is less than the market value of the property
transferred. (3) If the
transfer is of all of the settled property, for the purposes of section
90 treat the transfer as being of part only of the settled
property. (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—
(a) treat the section 2(2) amount for the year of
transfer or any earlier tax year as the amount calculated by taking
Steps 1 and 5 above, and (b)
reduce the total deemed gains by the amount of the total deemed gains
calculated by taking Step 1
above. Step
7 Take the steps in
paragraph 108(2) for the purpose of calculating the section 2(2) amount
for the transferee settlement for the tax year 2007-08 and earlier tax
years. For this
purpose— (a) treat the
section 2(2) amount for the year of transfer or any earlier tax year as
the amount calculated by taking Steps 2 to 4 above,
and (b) reduce the total deemed
gains by the amount of the total deemed gains calculated by taking Step
2 above. (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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