Finance Act 1995

128 Limit on income chargeable on non-residents: income tax. U.K.

(1) Subject to subsection (5) below, the income tax chargeable for any year of assessment on the total income of any person who is not resident in the United Kingdom shall not exceed the sum of the following amounts, that is to say—

(a) the amount of tax which, apart from this section, would be chargeable on that total income if—

(i) the amount of that income were reduced by the amount of any excluded income; and

(ii) there were disregarded any relief under Chapter I of Part VII of the Taxes Act 1988 to which that person is entitled for that year by virtue of section 278(2) of that Act or of any arrangements having effect by virtue of section 788 of that Act;

and

(b) the amount of tax deducted from so much of any excluded income as is income the tax on which is deducted at source.

(2) For the purposes of this section income arising for any year to a person who is not resident in the United Kingdom is excluded income in so far as it—

(a) falls within subsection (3) below; and

(b) is not income in relation to which that person has a UK representative for the purposes of section 126 above and Schedule 23 to this Act.

(3) Income falls within this subsection if—

(a) it is chargeable to tax under [F1 Schedule C,] Case III of Schedule D or Schedule F;

(b) it is chargeable to tax under Case VI of Schedule D by virtue of section 56 of the Taxes Act 1988 (transactions in deposits);

(c) it is chargeable to tax under Schedule E by virtue of section 150 or 617(1) of the Taxes Act 1988 or section 139(1) of the M1 Finance Act 1994 (social security benefits etc.);

(d) without being chargeable as mentioned in paragraphs (a) to (c) above or chargeable in accordance with section 171(2) of the M2 Finance Act 1993 (profits of the underwriting business of a member of Lloyd’s), it is income arising as mentioned in subsection (1)(b) or (c) of section 127 above; or

(e) it is income of such other description as the Treasury may by regulations designate for the purposes of this subsection;

and the power to make regulations for the purposes of paragraph (e) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

(4) In subsection (1)(b) above—

(a) the reference to excluded income the tax on which is deducted at source is a reference to excluded income from which an amount in respect of income tax is or is treated as deducted, on which any such amount is treated as paid or in respect of which there is a tax credit, and

(b) the reference, in relation to any such income, to the amount of income tax deducted shall be construed, accordingly, as a reference to the amount which is or is treated as deducted or which is treated as paid or, as the case may be, to the amount of that credit.

(5) This section shall not apply to the income tax chargeable for any year of assessment on the income of trustees not resident in the United Kingdom if there is a relevant beneficiary of the trust who is either—

(a) an individual ordinarily resident in the United Kingdom, or

(b) a company resident in the United Kingdom.

(6) In subsection (5) above, the reference to a relevant beneficiary, in relation to a trust, is a reference to any person who, as a person falling wholly or partly within any description of actual or potential beneficiaries, is either—

(a) a person who is, or will or may become, entitled under the trust to receive the whole or any part of any income under the trust; or

(b) a person to or for the benefit of whom the whole or any part of any such income may be paid or applied in exercise of any discretion conferred by the trust;

and for the purposes of this subsection references, in relation to a trust, to income under the trust shall include references to so much (if any) of any property falling to be treated as capital under the trust as represents amounts originally received by the trustees as income.

(7) This section shall apply, subject to subsections (8) and (9) below, in relation to the year 1995-96 and subsequent years of assessment.

(8) This section shall have effect in relation to the year 1995-96 as if the following paragraphs were substituted for paragraph (b) of subsection (2) above, that is to say—

“(aa) arises on or after 6th April 1995; and

(b) is not income in relation to which that person would have a UK representative for the purposes of section 126 above and Schedule 23 to this Act if sections 126 and 127 above and that Schedule applied for the year 1995-96.”

(9) This section shall have effect in relation to the year 1995-96 as if—

(a) the income falling within paragraphs (a) and (b) of subsection (3) above did not include any income arising otherwise than from a transaction falling within subsection (10) below; and

(b) the reference in paragraph (d) of subsection (3) above to income arising as mentioned in subsection (1)(b) or (c) of section 127 above were a reference to any income which would be such income if that section applied in relation to the year 1995-96.

(10) A transaction falls within this subsection if—

(a) it is either—

(i) a transaction carried out on behalf of the non-resident by a person who, at the time of the transaction, was carrying on the business of a broker; or

(ii) an investment transaction carried out on behalf of the non-resident by a person (“the manager”) who at the time was carrying on a business of providing investment management services;

(b) it was carried out by the broker or manager on behalf of the non-resident in the ordinary course of the business referred to in paragraph (a) above; and

(c) the remuneration which the broker or manager received in respect of that transaction for the provision to the non-resident of the services of a broker or, as the case may be, for the provision of the investment management services in question was at a rate not less than that which would have been customary for that class of business.

(11) In this section “investment transaction” has the same meaning as in section 127 above.

Textual Amendments

F1 Words in s. 128(3)(a) repealed (29.4.1996 with effect as mentioned in Sch. 7 paras. 31-35 of the amending Act) by 1996 c. 8, ss. 79, 205, Sch. 7 paras. 31-35, Sch. 41 Pt. V(2)

Modifications etc. (not altering text)

C1 S. 128 modified (29.4.1996) by 1988 c. 1, s. 689A(5) (as inserted (29.4.1996) by 1996 c. 8, s. 73, Sch. 6 para. 16)

Marginal Citations

M1 1994 c. 9.

M2 1993 c. 34.