Taxation (International and Other Provisions) Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Taxation (International and Other Provisions) Bill

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
293

(2)
The branch or agency is the UK representative of the non-UK
resident in relation to—
(a)
the amount of any income from the trade, profession or
vocation that arises (directly or indirectly) through or from
the branch or agency, and
5
(b)
the amount of any income from property or rights which are
used by, or held by or for, the branch or agency.
(3)
The following rules are to be applied for the purposes of subsection
(2) and Chapter 2C in relation to an amount within that subsection.

Rule 1
10

The UK representative continues to be the UK representative of the
non-UK resident in relation to the amount even after ceasing to be a
branch or agency through which the non-UK resident carries on the
trade, profession or vocation concerned.

Rule 2
15

The UK representative is treated in relation to the amount as a
distinct and separate person from the non-UK resident (if the
representative would not otherwise be so treated).

Rule 3

If the branch or agency is carried on by persons in partnership, the
20
partnership, as such, is treated in relation to the amount as the UK
representative of the non-UK resident.
(4)
For further rules that apply where a trade or profession carried on by
a non-UK resident in the United Kingdom is carried on in
partnership, see section 835F.
25
(5)
This section needs to be read with sections 835G to 835K (which
provide for descriptions of persons who are not to be regarded as the
UK representative of a non-UK resident if certain conditions are
met).”
4
After section 835E insert—
30
“835F
Trade or profession carried on in partnership
(1)
Subsection (2) applies if a trade or profession carried on by a non-UK
resident through a branch or agency in the United Kingdom is
carried on by the non-UK resident in partnership.
(2)
The trade or profession carried on through the branch or agency is,
35
for the purposes of section 835E and Chapter 2C, to be treated as
including the notional trade or profession.
(3)
Subsection (4) applies (in addition to subsection (2) if that subsection
also applies) if—
(a)
a trade or profession carried on by a non-UK resident in the
40
United Kingdom is carried on by the non-UK resident in
partnership, and
(b)
any member of the partnership is resident in the United
Kingdom.

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
294

(4)
The notional trade or profession is, for the purposes of section 835E
and Chapter 2C, to be treated as being a trade carried on in the
United Kingdom through the partnership as such.
(5)
In this section “the notional trade or profession” means the notional
trade from which the non-UK resident’s share in the partnership’s
5
profits or losses is treated for the purposes of section 852 of ITTOIA
2005 as deriving.”
5
After section 835F insert—
“Persons who are not UK representatives
835G
Agents
10
(1)
This section applies if a non-UK resident carries on (alone or in
partnership) a business through an agent in the United Kingdom.
(2)
The agent is not the UK representative of the non-UK resident in
relation to an amount within section 835E(2) arising to the non-UK
resident from—
15
(a)
so much of the non-UK resident’s business as relates to
disregarded transactions, or
(b)
property or rights which, as a result of disregarded
transactions, are used by, or held by or for, the agent on
behalf of the non-UK resident.
20
(3)
“Disregarded transactions” are transactions—
(a)
carried out through the agent in the United Kingdom, and
(b)
in respect of which the agent does not act in the course of
carrying on a regular agency for the non-UK resident.”
6
After section 835G insert—
25
“835H
Brokers
(1)
This section applies if a non-UK resident carries on (alone or in
partnership) a business through a broker in the United Kingdom.
(2)
The broker is not the UK representative of the non-UK resident in
relation to an amount within section 835E(2) if—
30
(a)
the amount is transaction income in relation to a transaction
carried out through the broker in the United Kingdom on
behalf of the non-UK resident, and
(b)
the independent broker conditions are met in relation to the
transaction (see section 835L).
35
(3)
In subsection (2) “transaction income”, in relation to a transaction
carried out through a broker in the United Kingdom on behalf of a
non-UK resident, has the same meaning as in Chapter 1 (see section
814(5)).”

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
295

7
After section 835H insert—
“835I
Investment managers
(1)
This section applies if a non-UK resident carries on (alone or in
partnership) a business through an investment manager in the
United Kingdom.
5
(2)
The investment manager is not the UK representative of the non-UK
resident in relation to an amount within section 835E(2) if—
(a)
the amount is transaction income in relation to an investment
transaction carried out through the investment manager in
the United Kingdom on behalf of the non-UK resident, and
10
(b)
the independent investment manager conditions are met in
relation to the investment transaction (see section 835M).
(3)
In subsection (2) “transaction income”, in relation to a transaction
carried out through an investment manager in the United Kingdom
on behalf of a non-UK resident, has the same meaning as in Chapter
15
1 (see section 814(5)).”
8
After section 835I insert—
“835J
Persons acting under alternative finance arrangements
(1)
Subsection (2) applies if an amount within section 835E(2) arising to
a non-UK resident consists of alternative finance return.
20
(2)
Neither of the following is the UK representative of the non-UK
resident in relation to the amount—
(a)
the other party to the alternative finance arrangements,
(b)
any other person acting for the non-UK resident in relation to
the alternative finance arrangements.
25
(3)
In subsection (1) “alternative finance return” means alternative
finance return within the application of section 564I, 564K or 564L(2)
or (3).
(4)
In subsection (2) the reference to “the alternative finance
arrangements” is a reference to the alternative finance arrangements
30
under which the alternative finance return mentioned in subsection
(1) arises.”
9
After section 835J insert—
“835K
Lloyd’s agents
(1)
This section applies if—
35
(a)
a non-UK resident (“X”) is a member of Lloyd’s, and
(b)
an amount within section 835E(2) arises to X from X’s
underwriting business.
(2)
A person who has been X’s members’ agent or the managing agent
of the syndicate in question is not the UK representative of X in
40
relation to the amount or to matters connected with the amount.
(3)
For the purposes of this section—
(a)
X is a member of Lloyd’s if X is a member within the meaning
of Chapter 3 of Part 2 of FA 1993, and

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
296

(b)
“members’ agent” and “managing agent” are to be construed
in accordance with section 184 of that Act.”
10
After section 835K insert—
“The independent broker conditions
835L
The independent broker conditions
5
(1)
The independent broker conditions are met in relation to a
transaction carried out on behalf of a non-UK resident by a broker in
the United Kingdom if conditions A to D are met.
(2)
Condition A is that at the time of the transaction the broker is
carrying on the business of a broker.
10
(3)
Condition B is that the transaction is carried out in the ordinary
course of that business.
(4)
Condition C is that the remuneration which the broker receives in
respect of the transaction for the provision of the services of a broker
to the non-UK resident is not less than is customary for that class of
15
business.
(5)
Condition D is that the broker does not fall (apart from this
subsection) to be treated under this Chapter, or under Chapter 1 of
Part 7A of TCGA 1992, as a UK representative of the non-UK resident
in relation to any amounts that—
20
(a)
are not included in transaction income in relation to the
transaction (see section 835H(2) and (3)), and
(b)
are chargeable to tax for the same tax year as that transaction
income.”
11
After section 835L insert—
25
“The independent investment manager conditions
835M
The independent investment manager conditions
(1)
The independent investment manager conditions are met in relation
to an investment transaction carried out on behalf of a non-UK
resident by an investment manager in the United Kingdom if
30
conditions A to E are met.
(2)
Condition A is that at the time of the transaction the investment
manager is carrying on a business of providing investment
management services.
(3)
Condition B is that the transaction is carried out in the ordinary
35
course of that business.
(4)
Condition C is that, when the investment manager acts on behalf of
the non-UK resident in relation to the transaction, the relationship
between them, having regard to its legal, financial and commercial
characteristics, is a relationship between persons carrying on
40
independent businesses dealing with each other at arm’s length.

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
297

(5)
Condition D is that the requirements of the 20% rule are met (see
section 835N).
(6)
Condition E is that the remuneration which the investment manager
receives in respect of the transaction for the provision of investment
management services to the non-UK resident is not less than is
5
customary for that class of business.”
12
After section 835M insert—
“835N
Investment managers: the 20% rule
(1)
The requirements of the 20% rule are met if conditions A and B are
met.
10
(2)
Condition A is that, in relation to a qualifying period, it has been or
is the intention of the investment manager and the persons
connected with the investment manager that at least 80% of the non-
UK resident’s relevant disregarded income should consist of
amounts to which none of them has a beneficial entitlement.
15
(3)
Condition B is that, so far as there is a failure to fulfil that intention,
that failure—
(a)
is attributable (directly or indirectly) to matters outside the
control of the investment manager and persons connected
with the investment manager, and
20
(b)
does not result from a failure by any of them to take such
steps as may be reasonable for mitigating the effect of those
matters in relation to the fulfilment of that intention.”
13
After section 835N insert—
“835O
Meaning of “qualifying period”, “relevant disregarded income” and
25
“beneficial entitlement”
(1)
This section applies for the purposes of this Chapter.
(2)
A “qualifying period” means—
(a)
the tax year in which the transaction income mentioned in
section 835I(2) is chargeable to tax, or
30
(b)
a period of not more than 5 years comprising two or more tax
years including that one.
(3)
The “relevant disregarded income” of the non-UK resident for a
qualifying period is the total of the non-UK resident’s income for the
tax years comprised in the qualifying period which derives from
35
investment transactions—
(a)
carried out by the investment manager on the non-UK
resident’s behalf, and
(b)
in relation to which the independent investment manager
conditions are met, ignoring the requirements of the 20%
40
rule.
(4)
A person has a “beneficial entitlement” to relevant disregarded
income if the person has or may acquire a beneficial entitlement that
is, or would be, attributable to the relevant disregarded income as a
result of having an interest or other rights mentioned in subsection
45
(5).

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
298

(5)
The interests and rights referred to in subsection (4) are—
(a)
an interest (whether or not an interest giving a right to an
immediate payment of a share in the profits or gains) in
property in which the whole or any part of the relevant
disregarded income is represented, or
5
(b)
an interest in, or other rights in relation to, the non-UK
resident.”
14
After section 835O insert—
“835P
Treatment of transactions where 20% rule not met
(1)
This section applies in the case of an investment transaction in
10
relation to which the independent investment manager conditions
are met, except for the requirements of the 20% rule.
(2)
This Chapter has effect as if the requirements of that rule were met
in relation to the transaction, but only in relation to so much of the
transaction income in relation to the transaction (see section 835I(2)
15
and (3)) as does not represent an amount—
(a)
which is relevant disregarded income of the non-UK
resident, and
(b)
to which the investment manager or a person connected with
the investment manager has or has had any beneficial
20
entitlement.”
15
After section 835P insert—
“835Q
Application of 20% rule to collective investment schemes
(1)
This section applies if amounts arise or accrue to the non-UK resident
as a participant in a collective investment scheme.
25
(2)
It applies for the purposes of determining whether the requirements
of the 20% rule are met in relation to a transaction carried out for the
purposes of the scheme (so far as the transaction is one in respect of
which amounts so arise or accrue).
(3)
In applying this section make the following assumptions—
30
(a)
that all the transactions carried out for the purposes of the
scheme are carried out on behalf of a company (“the assumed
company”) which is—
(i)
constituted for the purposes of the scheme, and
(ii)
non-UK resident, and
35
(b)
that the participants do not have any rights in respect of the
amounts arising or accruing in respect of those transactions,
other than the rights which, if they held shares in the
assumed company, would be their rights as shareholders.
(4)
If the scheme is such that the assumed company would not be
40
regarded for tax purposes as carrying on a trade in the United
Kingdom in relation to the tax year in which the transaction income
mentioned in section 835I(2) is chargeable to tax, the requirements of
the 20% rule are treated as met in relation to a transaction carried out
for the purposes of the scheme.
45

Taxation (International and Other Provisions) Bill
Schedule 6 — UK Representatives of non-UK residents
Part 1 — New Chapters 2B and 2C of Part 14 of ITA 2007
299

(5)
If the scheme is such that the assumed company would be so
regarded for tax purposes, sections 835N to 835P have effect in
relation to a transaction carried out for the purposes of the scheme
with the modifications in subsection (6).
(6)
The modifications are—
5
(a)
for references to the non-UK resident substitute references to
the assumed company, and
(b)
for references to the non-UK resident’s relevant disregarded
income for a qualifying period substitute references to the
sum of the amounts that would, for tax years comprised in
10
the qualifying period, be chargeable to tax on the assumed
company as profits deriving from the transactions—
(i)
carried out by the investment manager, and
(ii)
assumed to be carried out on behalf of the company.
(7)
In this section—
15
“collective investment scheme” has the meaning given by
section 235 of FISMA 2000, and
“participant”, in relation to a collective investment scheme, is
construed in accordance with that section.”
16
After section 835Q insert—
20
“Supplementary
835R
Supplementary provision
(1)
For the purposes of this Chapter a person is to be regarded as
carrying out a transaction on behalf of another if the person—
(a)
undertakes the transaction, whether on behalf of or to the
25
account of the other, or
(b)
gives instructions for it to be so carried out by another.
(2)
In the case of a person who acts as a broker or investment manager
as part only of a business, this Chapter has effect as if that part were
a separate business.”
30
17
After section 835R insert—
“835S
Interpretation of Chapter
(1)
This section applies for the purposes of this Chapter.
(2)
“Branch or agency” means any factorship, agency, receivership,
branch or management.
35
(3)
“Investment manager” has the same meaning as in Chapter 1 (see
section 827).
(4)
“Investment transaction” means any transaction of a description
specified for the purposes of this section in regulations made by the
Commissioners for Her Majesty’s Revenue and Customs.
40
(5)
Provision made in regulations under subsection (4) may, in
particular, have effect in relation to the tax year current on the day on
which the regulations are made.”