Finance Bill

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Session 2009 - 10
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Finance Bill

Finance Bill
Schedule 10 — Foreign currency bank accounts
107

Schedule 10
Section 35

Foreign currency bank accounts
1
In TCGA 1992, after section 252 insert—
“252A
Foreign currency bank accounts and the remittance basis
Schedule 8A contains provision about the calculation of chargeable
5
gains on disposals of debts to which section 252(1) applies which are
not situated in the United Kingdom.”
2
In that Act, after Schedule 8 insert—
“Schedule 8A
Foreign currency bank accounts
10
Introductory
1     (1)
This Schedule applies where—
(a)
an individual makes a disposal of a debt to which section
252(1) applies (“the relevant disposal”),
(b)
the debt (“the section 252 debt”) is not situated in the
15
United Kingdom, and
(c)
money or money’s worth which is remitted foreign income
(“the section 37 amount”) is excluded under section 37
from the consideration for the relevant disposal.
      (2)
For this purpose “remitted foreign income” means income of the
20
individual which is chargeable to income tax on the alternative
basis of charge set out in Chapter A1 of Part 14 of ITA 2007
(remittance basis).
      (3)
In determining whether the condition in sub-paragraph (1)(c) is
met, the following provisions of this Schedule are to be ignored.
25
Section 37 operates to exclude the whole consideration
2     (1)
This paragraph applies where the section 37 amount constitutes
the whole of the unreduced consideration.
      (2)
If the relevant disposal is a part disposal of the section 252 debt,
section 42 applies as if the reference in subsection (2)(a) of that
30
section to the consideration for the disposal were a reference to the
unreduced consideration for the disposal.
      (3)
Any loss accruing to the individual on the relevant disposal is not
an allowable loss.
Section 37 operates to exclude part of the consideration
35
3     (1)
This paragraph applies where the section 37 amount constitutes
part of the unreduced consideration.
      (2)
For the purposes of this Act the relevant disposal is to be treated
as if it were—

Finance Bill
Schedule 10 — Foreign currency bank accounts
108

(a)
a disposal of so much of the section 252 debt as is
represented by the section 37 proportion of the sum
mentioned in sub-paragraph (3) (“debt A”), and
(b)
a separate disposal of so much of the section 252 debt as is
represented by the remainder of that sum (“debt B”).
5
      (3)
That sum is—
(a)
if the relevant disposal is a disposal of the whole of the
section 252 debt, the sum referred to in section 252(1), and
(b)
if the relevant disposal is a part disposal of that debt, the
proportion of the sum referred to in section 252(1) to which
10
that part disposal relates.
      (4)
Sub-paragraphs (5) to (9) apply for the purposes of—
(a)
the computation of the gain accruing on the disposals
under sub-paragraph (2), and
(b)
the application of Chapter 3 of Part 2 of this Act in relation
15
to the part of the debt (if any) which remains undisposed
of.
      (5)
The consideration for the disposal (before any exclusion under
section 37) is—
(a)
in the case of debt A, the section 37 amount, and
20
(b)
in the case of debt B, the remainder of the unreduced
consideration.
      (6)
If the relevant disposal is not a part disposal of the section 252
debt—
(a)
the section 37 proportion of the debt costs and the disposal
25
costs is to be attributed to debt A, and
(b)
the remaining debt costs and disposal costs are to be
attributed to debt B.
      (7)
Sub-paragraphs (8) and (9) apply if the relevant disposal is a part
disposal of the section 252 debt.
30
      (8)
Section 42(2) applies as if it provided for the debt costs to be
apportioned between debt A, debt B and the remainder of the
section 252 debt in the proportions which those parts of the section
252 debt bear to one another.
      (9)
The section 37 proportion of the disposal costs is to be attributed
35
to debt A and the remaining disposal costs are to be attributed to
debt B.
     (10)
Any loss accruing to the individual on the disposal of debt A is not
an allowable loss.
Interpretation
40
4
In this Schedule—
“debt costs” means the sums which under section 38(1)(a)
and (b) are attributable to the section 252 debt;
“disposal costs” means the costs within section 38(1)(c) in
relation to the relevant disposal;
45

Finance Bill
Schedule 11 — Penalties: offshore income etc
109

“the section 252 debt”, “the relevant disposal” and “the
section 37 amount” are to be construed in accordance with
paragraph 1;
“the section 37 proportion” means the proportion of the
unreduced consideration which constitutes the section 37
5
amount;
“the unreduced consideration” means the consideration for
the relevant disposal ignoring the exclusion of the section
37 amount.”
3
The amendments made by this Schedule have effect in relation to disposals
10
on or after 16 December 2009.
Schedule 11
Section 36

Penalties: offshore income etc
Schedule 24 to FA 2007
1
Schedule 24 to FA 2007 (penalties for errors) is amended as follows.
15
2
For paragraph 4 substitute—
“4    (1)
This paragraph sets out the penalty payable under paragraph 1.
      (2)
If the inaccuracy is in category 1, the penalty is—
(a)
for careless action, 30% of the potential lost revenue,
(b)
for deliberate but not concealed action, 70% of the potential
20
lost revenue, and
(c)
for deliberate and concealed action, 100% of the potential
lost revenue.
      (3)
If the inaccuracy is in category 2, the penalty is—
(a)
for careless action, 45% of the potential lost revenue,
25
(b)
for deliberate but not concealed action, 105% of the
potential lost revenue, and
(c)
for deliberate and concealed action, 150% of the potential
lost revenue.
      (4)
If the inaccuracy is in category 3, the penalty is—
30
(a)
for careless action, 60% of the potential lost revenue,
(b)
for deliberate but not concealed action, 140% of the
potential lost revenue, and
(c)
for deliberate and concealed action, 200% of the potential
lost revenue.
35
      (5)
Paragraph 4A explains the 3 categories of inaccuracy.
4A    (1)
An inaccuracy is in category 1 if—
(a)
it involves a domestic matter, or
(b)
it involves an offshore matter and—
(i)
the territory in question is a category 1 territory, or
40

Finance Bill
Schedule 11 — Penalties: offshore income etc
110

(ii)
the tax at stake is a tax other than income tax or
capital gains tax.
      (2)
An inaccuracy is in category 2 if—
(a)
it involves an offshore matter,
(b)
the territory in question is a category 2 territory, and
5
(c)
the tax at stake is income tax or capital gains tax.
      (3)
An inaccuracy is in category 3 if—
(a)
it involves an offshore matter,
(b)
the territory in question is a category 3 territory, and
(c)
the tax at stake is income tax or capital gains tax.
10
      (4)
An inaccuracy “involves an offshore matter” if it results in a
potential loss of revenue that is charged on or by reference to—
(a)
income arising from a source in a territory outside the UK,
(b)
assets situated or held in a territory outside the UK,
(c)
activities carried on wholly or mainly in a territory outside
15
the UK, or
(d)
anything having effect as if it were income, assets or
activities of a kind described above.
      (5)
An inaccuracy “involves a domestic matter” if it results in a
potential loss of revenue that is charged on or by reference to
20
anything not mentioned in sub-paragraph (4)(a) to (d).
      (6)
If a single inaccuracy is in more than one category (each referred
to as a “relevant category”)—
(a)
it is to be treated for the purposes of this Schedule as if it
were separate inaccuracies, one in each relevant category
25
according to the matters that it involves, and
(b)
the potential lost revenue is to be calculated separately in
respect of each separate inaccuracy.
      (7)
“Category 1 territory”, “category 2 territory” and “category 3
territory” are defined in paragraph 21A.
30
      (8)
“Assets” has the meaning given in section 21(1) of TCGA 1992, but
also includes sterling.
4B
The penalty payable under paragraph 1A is 100% of the potential
lost revenue.
4C
The penalty payable under paragraph 2 is 30% of the potential lost
35
revenue.
4D
Paragraphs 5 to 8 define “potential lost revenue”.”
3
For paragraph 10 substitute—
“10   (1)
If a person who would otherwise be liable to a penalty of a
percentage shown in column 1 of the Table (a “standard
40
percentage”) has made a disclosure, HMRC must reduce the
standard percentage to one that reflects the quality of the
disclosure.

Finance Bill
Schedule 11 — Penalties: offshore income etc
111

      (2)
But the standard percentage may not be reduced to a percentage
that is below the minimum shown for it—
(a)
in the case of a prompted disclosure, in column 2 of the
Table, and
(b)
in the case of an unprompted disclosure, in column 3 of the
5
Table.

Standard %
Minimum % for
Minimum % for

prompted
unprompted

disclosure
disclosure

30%
15%
0%

10

45%
22.5%
0%

60%
30%
0%

70%
35%
20%

105%
52.5%
30%

140%
70%
40%

15

100%
50%
30%

150%
75%
45%

200%
100%
60%”.

4
In paragraph 12 (interaction with other penalties), for sub-paragraph (4)
substitute—
20
    “(4)
Where penalties are imposed under paragraphs 1 and 1A in
respect of the same inaccuracy, the aggregate of the amounts of the
penalties must not exceed the relevant percentage of the potential
lost revenue.
      (5)
The relevant percentage is—
25
(a)
if the penalty imposed under paragraph 1 is for an
inaccuracy in category 1, 100%,
(b)
if the penalty imposed under paragraph 1 is for an
inaccuracy in category 2, 150%, and
(c)
if the penalty imposed under paragraph 1 is for an
30
inaccuracy in category 3, 200%.”
5
In Part 5 (general), before the heading “Interpretation” insert—
“Classification of territories
21A   (1)
A category 1 territory is a territory designated as a category 1
territory by order made by the Treasury.
35
      (2)
A category 2 territory is a territory that is neither—
(a)
a category 1 territory, nor
(b)
a category 3 territory.

Finance Bill
Schedule 11 — Penalties: offshore income etc
112

      (3)
A category 3 territory is a territory designated as a category 3
territory by order made by the Treasury.
      (4)
In considering how to classify a territory for the purposes of this
paragraph, the Treasury must have regard to—
(a)
the existence of any arrangements between the UK and
5
that territory for the exchange of information for tax
enforcement purposes,
(b)
the quality of any such arrangements (in particular,
whether they provide for information to be exchanged
automatically or on request), and
10
(c)
the benefit that the UK would be likely to obtain from
receiving information from that territory, were such
arrangements to exist with it.
      (5)
An order under this paragraph is to be made by statutory
instrument.
15
      (6)
Subject to sub-paragraph (7), an instrument containing an order
under this paragraph is subject to annulment in pursuance of a
resolution of the House of Commons.
      (7)
If the order is—
(a)
the first order to be made under sub-paragraph (1), or
20
(b)
the first order to be made under sub-paragraph (3),

it may not be made unless a draft of the instrument containing it
has been laid before, and approved by a resolution of, the House
of Commons.
      (8)
An order under this paragraph does not apply to inaccuracies in a
25
document given to HMRC (or, in a case within paragraph 3(2),
inaccuracies discovered by P) before the date on which the order
comes into force.
Location of assets etc
21B   (1)
The Treasury may by regulations make provision for determining
30
for the purposes of paragraph 4A where—
(a)
a source of income is located,
(b)
an asset is situated or held, or
(c)
activities are wholly or mainly carried on.
      (2)
Different provision may be made for different cases and for
35
income tax and capital gains tax.
      (3)
Regulations under this paragraph are to be made by statutory
instrument.
      (4)
An instrument containing regulations under this paragraph is
subject to annulment in pursuance of a resolution of the House of
40
Commons.”
6
After paragraph 23A insert—
“23B
“UK” means the United Kingdom, including the territorial sea of
the United Kingdom.”

Finance Bill
Schedule 11 — Penalties: offshore income etc
113

Schedule 41 to FA 2008
7
Schedule 41 to FA 2008 (penalties: failure to notify and certain VAT and
excise wrongdoing) is amended as follows.
8
For paragraph 6 substitute—
“6    (1)
This paragraph sets out the penalty payable under paragraph 1.
5
      (2)
If the failure is in category 1, the penalty is—
(a)
for a deliberate and concealed failure, 100% of the potential
lost revenue,
(b)
for a deliberate but not concealed failure, 70% of the
potential lost revenue, and
10
(c)
for any other case, 30% of the potential lost revenue.
      (3)
If the failure is in category 2, the penalty is—
(a)
for a deliberate and concealed failure, 150% of the potential
lost revenue,
(b)
for a deliberate but not concealed failure, 105% of the
15
potential lost revenue, and
(c)
for any other case, 45% of the potential lost revenue.
      (4)
If the failure is in category 3, the penalty is—
(a)
for a deliberate and concealed failure, 200% of the potential
lost revenue,
20
(b)
for a deliberate but not concealed failure, 140% of the
potential lost revenue, and
(c)
for any other case, 60% of the potential lost revenue.
      (5)
Paragraph 6A explains the 3 categories of failure.
6A    (1)
A failure is in category 1 if—
25
(a)
it involves a domestic matter, or
(b)
it involves an offshore matter and—
(i)
the territory in question is a category 1 territory, or
(ii)
the tax at stake is a tax other than income tax or
capital gains tax.
30
      (2)
A failure is in category 2 if—
(a)
it involves an offshore matter,
(b)
the territory in question is a category 2 territory, and
(c)
the tax at stake is income tax or capital gains tax.
      (3)
A failure is in category 3 if—
35
(a)
it involves an offshore matter,
(b)
the territory in question is a category 3 territory, and
(c)
the tax at stake is income tax or capital gains tax.
      (4)
A failure “involves an offshore matter” if it results in a potential
loss of revenue that is charged on or by reference to—
40
(a)
income arising from a source in a territory outside the UK,
(b)
assets situated or held in a territory outside the UK,
(c)
activities carried on wholly or mainly in a territory outside
the UK, or