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Finance Act 2008

Status:

This is the original version (as it was originally enacted).

SCHEDULES

Section 5

SCHEDULE 1Abolition of starting and savings rates and creation of starting rate for savings

Part 1Amendments of ITA 2007

1ITA 2007 is amended as follows.

2For section 7 (savings rate) substitute—

7The starting rate for savings

The starting rate for savings is 10%.

3(1)Section 10 (income charged at main rates: individuals) is amended as follows.

(2)Omit subsection (1).

(3)For subsection (2) substitute—

(2)Income tax on an individual’s income up to the basic rate limit is charged at the basic rate (except to the extent that, in accordance with section 12, it is charged at the starting rate for savings).

(4)In subsection (4), omit the entry relating to section 12.

(5)Insert at the end—

(6)The basic rate limit is increased in some circumstances: see—

(a)section 414(2) (gift aid relief), and

(b)section 192(4) of FA 2004 (relief for pension contributions).

(7)See section 21 for indexation of the basic rate limit.

(6)Accordingly, in the heading, omit “starting,”.

4In section 11(2) (income charged at the basic rate: persons other than individuals), omit the reference to section 12.

5For section 12 substitute—

12Income charged at the starting rate for savings

(1)Income tax is charged at the starting rate for savings (rather than the basic rate) on so much of an individual’s income up to the starting rate limit for savings as is savings income.

(2)This is subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(3)The starting rate limit for savings is £2,320.

(4)See section 21 for indexation of the starting rate limit for savings.

(5)Section 16 has effect for determining the extent to which a person’s income up to the starting rate limit for savings consists of savings income.

6In section 13 (income charged at dividend ordinary and dividend upper rates: individuals)—

(a)in subsection (1)(b), omit “starting or”, and

(b)in subsection (4), omit “starting,”.

7In section 16(1) (savings and dividend income to be treated as highest part of total income), for the words from “the rate” to the end substitute

(a)the extent to which a person’s income up to the starting rate limit for savings consists of savings income, and

(b)the rate at which income tax would be charged on a person’s dividend income apart from section 13.

8(1)Section 17 (repayment: tax paid at basic rate instead of starting rate or savings rate) is amended as follows.

(2)In subsection (1), for “starting or savings rate” substitute “starting rate for savings”.

(3)Accordingly, in the heading, for “starting or savings rate” substitute “starting rate for savings”.

9For the heading before section 20 substitute—

Indexation of basic rate limit and starting rate limit for savings.

10Omit section 20 (starting rate limit and basic rate limit).

11(1)Section 21 (indexation of starting and basic rate limits) is amended as follows.

(2)Omit subsection (2).

(3)After subsection (3) insert—

(3A)The starting rate limit for savings for the tax year is the amount found as follows.

  • Step 1

    Increase the starting rate limit for savings for the previous tax year by the same percentage as the percentage increase in the retail prices index.

  • Step 2

    If the result of Step 1 is a multiple of £10, it is the starting rate limit for savings for the tax year.

    If the result of Step 1 is not a multiple of £10, round it up to the nearest amount which is a multiple of £10.

    That amount is the starting rate limit for savings for the tax year.

(4)In subsection (4), for “(2) and (3)” substitute “(3) and (3A)”.

(5)In subsection (5)—

(a)for “section 20” substitute “sections 10 and 12”,

(b)for “(2) and (3)” substitute “(3) and (3A)”, and

(c)for “starting rate limit and the basic rate limit” substitute “basic rate limit and starting rate limit for savings”.

(6)Accordingly, in the heading, for “starting rate limit and the basic rate limit” substitute “basic rate limit and starting rate limit for savings”.

12In section 31(2), omit “or savings rate”.

13(1)Section 158 (form and amount of EIS relief) is amended as follows.

(2)In subsection (2), for “savings rate” substitute “EIS rate”.

(3)After that subsection insert—

(2A)In this Part “the EIS rate” means 20%.

14In section 209(3) (withdrawal or reduction of EIS relief: disposal of shares)—

(a)in the formula, for “S” substitute “EISR”, and

(b)for the definition of “S” substitute “EISR is the EIS rate.”

15In section 210(1)(b) (cases where maximum EIS relief not obtained), for “savings rate for that year” substitute “EIS rate”.

16In section 213(2) (withdrawal or reduction of EIS relief: value received by investor)—

(a)in the formula, for “S” substitute “EISR”, and

(b)for the definition of “S” substitute “EISR is the EIS rate.”

17In section 220(1)(b) (cases where maximum EIS relief not obtained), for “savings rate for that year” substitute “EIS rate”.

18In section 224(2) (withdrawal or reduction of EIS relief: repayments etc of share capital to other persons)—

(a)in the formula, for “S” substitute “EISR”, and

(b)for the definition of “S” substitute “EISR is the EIS rate.”

19In section 229(1)(b) (cases where maximum EIS relief not obtained), for “savings rate for that year” substitute “EIS rate”.

20In section 414(2) (relief for gifts to charity), for “section 20” substitute “section 10”.

21In section 486(1) (how allowable expenses are to be set against trust rate income), in Step 5, for “savings rate” substitute “basic rate”.

22(1)Section 498 (types of income tax for purposes of section 497) is amended as follows.

(2)In subsection (1), in Type 3A, for “savings rate” substitute “basic rate”.

(3)In that subsection, in Type 4, omit “or at the savings rate”.

(4)In subsection (2A), for “savings rate” substitute “basic rate”.

23In section 504(3) (treatment of income of unauthorised unit trust), omit “or at the savings rate”.

24In section 745(1) (rates of tax applicable to income charged under sections 720 and 727 etc), for “savings rate” substitute “starting rate for savings”.

25In section 851(2) (deduction by deposit-takers and building societies), for “savings rate” substitute “basic rate”.

26In section 874(2) (deduction from payments of yearly interest), for “savings rate” substitute “basic rate”.

27In section 889(4) (deduction from payments in respect of building society securities), for “savings rate” substitute “basic rate”.

28In section 892(2) (deduction from UK public dividends), for “savings rate” substitute “basic rate”.

29In section 901(4) (deduction from annual payments made by other persons), for “the applicable rate (see section 902)” substitute “the basic rate in force for the tax year in which the payment is made”.

30Omit section 902 (meaning of “applicable rate” in section 901).

31In section 919(2) (manufactured interest on UK securities: payments by UK residents etc), for “savings rate” substitute “basic rate”.

32In section 939(2) (duty to retain bonds where issue treated as payment of interest), for “savings rate” substitute “basic rate”.

33(1)Section 989 (definitions) is amended as follows.

(2)In the definition of “basic rate limit”, for “20(2)” substitute “10”.

(3)Omit the definition of “savings rate”.

(4)For the definitions of “starting rate” and “starting rate limit” substitute—

“starting rate for savings” has the meaning given by section 7,

“starting rate limit for savings” has the meaning given by section 12,.

34In section 1014(5)(b)(i) (orders and regulations not subject to annulment), for “starting rate limit and basic rate limit” substitute “basic rate limit and starting rate limit for savings”.

35In Schedule 1 (consequential amendments), omit paragraphs 85(2), 86, 112, 151, 152, 191, 244, 259, 279, 530, 535(2), 536(3), 537, 538, 564, 565 and 592(47) and (49).

36(1)Schedule 4 (index of defined expressions) is amended as follows.

(2)After the entry relating to “EIS” insert—

EIS rate (in Part 5)section 158(2A).

(3)For the entries relating to “starting rate” and “starting rate limit” substitute—

starting rate for savingssection 7
starting rate limit for savingssection 12.

(4)Omit the entry relating to “savings rate”.

Part 2Other amendments

TMA 1970

37TMA 1970 is amended as follows.

38In section 7(6) (notice of liability to income tax and capital gains tax), for “, the savings rate or the starting rate” substitute “or the starting rate for savings”.

39In section 91(3)(c) (effect of interest on reliefs), for “, the savings rate or the starting rate” substitute “or the starting rate for savings”.

ICTA

40ICTA is amended as follows.

41In section 468(1A) (authorised unit trusts), for “savings rate” substitute “basic rate”.

42In section 468A(1) (open-ended investment companies), for “savings rate” substitute “basic rate”.

43In section 552(5)(f)(i) (information: duty of insurers), for “savings rate” substitute “basic rate”.

44In section 699A(4)(b) (untaxed sums comprised in the income of the estate), for “savings rate” substitute “basic rate”.

45In section 701(3A) (estates of deceased persons in administration), omit—

(a)“, the savings rate” (in both places),

(b)“at the savings rate or”, and

(c)sub-paragraph (ii) of paragraph (b) and the “and” before it.

46Omit section 789(2) (double taxation arrangements made under old law: surtax).

FA 1989

47In section 88(1) of FA 1989 (insurance companies: policy holders' share of profits), for “savings rate” substitute “basic rate”.

TCGA 1992

48In section 150A(3)(b) of TCGA 1992 (enterprise investment schemes), for “savings rate” substitute “basic rate”.

FA 1996

49Omit paragraph 21 of Schedule 6 to FA 1996 (which amends section 789(2) of ICTA).

ITTOIA 2005

50ITTOIA 2005 is amended as follows.

51In section 465A(1)(b) (gains from contracts for life insurance etc: amounts for which individuals liable to be treated as highest part of total income), for “savings rate” substitute “basic rate”.

52In section 466(2) (gains from contracts for life insurance etc: personal representatives), for “savings rate” substitute “basic rate”.

53In section 467(7) (gains from contracts for life insurance etc: UK resident trustees), for “savings rate” substitute “basic rate”.

54(1)Section 530 (gains from contracts for life insurance etc: income tax treated as paid) is amended as follows.

(2)In subsection (1), for “savings rate” substitute “basic rate”.

(3)Omit subsection (6).

55In section 535(3) (gains from contracts for life insurance etc: top slicing relief)—

(a)for “SRL” in both places substitute “BRL”, and

(b)for “savings rate” substitute “basic rate”.

56In section 536(1) (gains from contracts for life insurance etc: top slicing relieved liability-one chargeable event), for “savings rate” substitute “basic rate”.

57In section 537 (gains from contracts for life insurance etc: top slicing relieved liability-two or more chargeable events), for “savings rate” substitute “basic rate”.

58In section 539(5) (gains from contracts for life insurance etc: relief for deficiencies)—

(a)omit Step 2,

(b)in Step 3, for “2” substitute “1” and omit “other”, and

(c)in Step 5, omit the sentence relating to Step 2.

59In section 669(3)(a)(i) (reduction in residuary income: inheritance tax on accrued income), for “, at the savings rate” substitute “of an amount not exceeding the starting rate limit for savings, at the starting rate for savings”.

60In section 679(3) (income from which basic amounts are treated as paid), omit paragraph (b) (apart from the “and” at the end).

61In section 680(4) (income treated as bearing income tax), for “savings rate” substitute “basic rate”.

62(1)Section 680A (income treated as savings income or dividend income) is amended as follows.

(2)In subsection (1)—

(a)for “Subsections (2) and (3) apply” substitute “Subsection (3) applies”, and

(b)omit “the savings rate or”.

(3)Omit subsection (2).

(4)In subsection (3), for the words from the beginning to “it” substitute “The income”.

(5)In subsection (4)—

(a)for “Subsections (5) and (6) apply” substitute “Subsection (6) applies”, and

(b)omit “the savings rate or”.

(6)Omit subsection (5).

(7)In subsection (6), for the words from the beginning to “it” substitute “The income”.

(8)Accordingly, in the heading omit “savings income or”.

63(1)Schedule 4 (index of defined expressions) is amended as follows.

(2)For the entry relating to “starting rate” substitute—

starting rate for savingssection 7 of ITA 2007 (as applied by section 989 of that Act)
starting rate limit for savingssection 12 of ITA 2007 (as applied by section 989 of that Act).

(3)Omit the entry relating to “savings rate”.

F(No.2)A 2005

64In section 7(5) of F(No.2)A 2005 (charge to income tax on social security pension lump sum)—

(a)omit paragraph (b), and

(b)in paragraph (c), for “exceeds the starting rate limit” substitute “is greater than nil”.

Part 3Commencement

65Apart from the amendments made by paragraph 11, the amendments made by this Schedule have effect for the tax year 2008-09 and subsequent tax years.

Section 8

SCHEDULE 2Capital gains tax reform

Rate: consequentials

1TCGA 1992 is amended as follows.

2In section 2(7)(a) (chargeable gains and allowable losses), omit “77 or”.

3Omit section 6 (rates: special cases).

4In section 13(7A) (attribution of gains to members of non-resident companies: ordering rules), omit paragraphs (b) to (d).

5Omit sections 77 to 79 (charge on settlor with interest in settlement).

6Omit section 88(6) (gains of dual resident settlements: sections 77 to 79 to be ignored).

7(1)Schedule 4A (disposal of interest in settled property: deemed disposal of underlying assets) is amended as follows.

(2)In paragraph 7—

(a)in sub-paragraph (4), for “77(2) to (5) and (8)” substitute “169F(2) to (6)”, and

(b)in sub-paragraph (5)(c), for “77(2A)(a) or (b)” substitute “169F(3A)(a) or (b)”.

(3)In paragraph 12—

(a)for “section 79(1) and (3) to (5A)” substitute “paragraphs 7 and 8(1), (3), (6) and (7) of Schedule 5”, and

(b)for “sections 77 and 78” substitute “section 86”.

8(1)Schedule 4B (transfers of value by trustees linked with trustee borrowing) is amended as follows.

(2)In paragraph 1(1), omit “77,”.

(3)In paragraph 3, omit—

(a)in sub-paragraph (1), “77,”, and

(b)sub-paragraph (2),

and in the heading before it omit “77,”.

9Omit paragraph 6(3) of Schedule 4C (attribution of gains to beneficiaries: sections 77 to 79 to be ignored).

10In paragraph 1(1) of Schedule 5 (construction of section 86(1)(e)), for “sections 3 and 77 to 79” substitute “section 3”.

11Chapter 4 of Part 2 of FA 2005 (trusts with vulnerable beneficiary) is amended as follows.

12In section 23(4) (introduction), for “33” substitute “32”.

13In section 26(1) (income tax: amount of relief), in the definition of VQTI, after “extra” insert “income”.

14(1)Section 28 (vulnerable person’s liability: VQTI) is amended as follows.

(2)In subsection (1), after “total” (in both cases) insert “income”.

(3)In subsection (2), omit “and capital gains tax”.

(4)In subsection (4), omit paragraph (b) and the “and” before it.

(5)In subsection (7), omit paragraph (b) and the “and” before it.

15In section 30 (qualifying trust gains: special capital gains tax treatment), omit subsections (1A) and (3A).

16(1)Section 31 (UK resident vulnerable persons: section 77 treatment) is amended as follows.

(2)For subsections (2) and (3) substitute—

(2)The trustees' liability to capital gains tax for the tax year is to be reduced by an amount equal to—

TQTG - VQTG

where—

  • TQTG is the amount of capital gains tax to which the trustees would (apart from this Chapter) be liable for the tax year in respect of the qualifying trust gains, and

  • VQTG is the amount arrived at under subsection (3).

(3)That amount is—

TLVA - TLVB

where—

  • TLVB is the total amount of capital gains tax to which the vulnerable person is liable for the tax year, and

  • TLVA is what TLVB would be if the qualifying trust gains accrued to the vulnerable person (instead of to the trustees) and no allowable losses were deducted from the qualifying trust gains.

(3)In the heading, for “section 77 treatment” substitute “amount of relief”.

17(1)Section 32 (non-UK resident vulnerable persons: amount of relief) is amended as follows

(2)In subsection (2), for the definition of VQTG substitute—

VQTG is the amount arrived at under subsection (3).

(3)After that subsection insert—

(3)That amount is—

TLVA - TLVB

where—

  • TLVB is the total amount of capital gains tax to which the vulnerable person would be liable for the tax year if the vulnerable person’s taxable amount for the tax year for the purposes of section 3 of TCGA 1992 were equal to the vulnerable person’s deemed CGT taxable amount for the tax year (if any), and

  • TLVA is what TLVB would be if the vulnerable person’s taxable amount for the tax year for the purposes of section 3 of TCGA 1992 were equal to the aggregate of the vulnerable person’s deemed CGT taxable amount for the tax year (if any) and the amount of the qualifying trust gains.

(4)For the purposes of this section the vulnerable person’s deemed CGT taxable amount for the tax year is to be determined in accordance with Schedule 1.

18Omit section 33 (non-UK resident vulnerable person’s liability: VQTG).

19In section 41(3) (interpretation), for “33” substitute “32”.

20(1)Schedule 1 (non-UK resident vulnerable persons: interpretation) is amended as follows.

(2)Omit paragraphs 1 and 2.

(3)Omit paragraph 4.

(4)In paragraph 7(1), for “paragraphs 4 and 6” substitute “paragraph 6”.

21In consequence of section 8 and paragraphs 1 to 20, omit—

(a)paragraphs 27 to 29 of Schedule 17 to FA 1995,

(b)paragraphs 24 and 25 of Schedule 4 to F(No.2)A 1997,

(c)in FA 1998

(i)section 120, and

(ii)paragraph 6(1) of Schedule 21,

(d)section 26 of FA 1999,

(e)section 37 of FA 2000,

(f)paragraph 3 of Schedule 11 to FA 2002,

(g)paragraph 2 of Schedule 21 to FA 2004,

(h)paragraphs 427 and 428 of Schedule 1 to ITTOIA 2005,

(i)section 44(2) of FA 2005,

(j)paragraphs 3, 13, 29, 31 and 48(1) of Schedule 12 to FA 2006, and

(k)paragraphs 295, 296 and 301 of Schedule 1 to ITA 2007.

22The amendments made by paragraphs 1 to 21 have effect for the tax year 2008-09 and subsequent tax years.

Abolition of taper relief

23TCGA 1992 is amended as follows.

24(1)Section 2 (chargeable gains and allowable losses) is amended as follows.

(2)For subsections (4) to (6) substitute—

(4)If chargeable gains are treated by virtue of section 87 or 89(2) as accruing to a person in a tax year (“the relevant deemed gains”)—

(a)subsection (2) has effect as if the relevant deemed gains had not accrued, and

(b)the amount on which the person is charged to capital gains tax for that year is the sum of—

(i)the amount given by subsection (2) as it has effect by virtue of paragraph (a), and

(ii)the amount of the relevant deemed gains.

(5)In subsection (4) the reference to section 87 or 89(2) is to that section read, where appropriate, with section 10A.

(3)In subsection (7), omit—

(a)in paragraph (b) of the first sentence, sub-paragraph (ii) and the “and” before it,

(b)in paragraph (c) of the first sentence, “(“the equal tapered amounts”)”, and

(c)in the words following paragraph (c) in the first sentence, and in the second sentence (in both places), “equal-tapered”.

(4)Omit subsection (8).

25Omit section 2A (taper relief).

26(1)Section 3 (annual exempt amount) is amended as follows.

(2)In subsection (5), for the words from “which, after” to the end of paragraph (c) substitute “which”.

(3)In subsection (5C)(c)—

(a)for “in a year in which any amount falls to be brought into account by virtue of section 2(5)(b)” substitute “if section 2(4) applies for that year,”, and

(b)for “falling to be so brought into account” substitute “mentioned in section 2(4)(b)(ii)”.

27In section 3A(2) (reporting limits)—

(a)omit paragraph (a), and

(b)in paragraph (b), for “such a deduction does fall to be made is the amount before deduction of losses or any reduction for taper relief” substitute “a deduction falls to be made in respect of allowable losses is the amount before the deduction”.

28Omit section 13(10A) (attribution of gains to members of non-resident companies).

29(1)Section 62 (death) is amended as follows

(2)In subsection (2A), for “brought into account for that year by virtue of section 2(5)(b)” substitute “treated as accruing by virtue of section 87 or 89(2) (read, where appropriate, with section 10A)”.

(3)Omit subsection (2B).

30In section 86(1)(e) (attribution of gains to settlors with interest in non-resident or dual resident settlements), for the words after “under section 2(2)” substitute “if the assumption as to residence specified in subsection (3) below were made;”.

31(1)Section 86A (attribution of gains to settlor in section 10A cases) is amended as follows.

(2)In subsection (2)—

(a)for “the tapered section 86(1)(e) amount” substitute “the amount falling within section 86(1)(e)”, and

(b)for “the tapered section 86(1)(e) amounts” substitute “the amounts falling within section 86(1)(e)”.

(3)Omit subsection (2A).

(4)Omit subsection (2B).

(5)In subsection (7), for “the tapered section 10A amount” substitute “the amount (or aggregate amount) falling in accordance with that section to be so attributed”.

(6)Omit subsection (7A).

32Omit section 150D (enterprise investment scheme: application of taper relief).

33In subsection (8) of section 165 (relief for gifts of business assets), for paragraph (aa) substitute—

(aa)“holding company”, “trading company” and “trading group” have the meaning given by section 165A; and.

34After that section insert—

165AMeaning of “holding company”, “trading company” and “trading group”

(1)This section has effect for the interpretation of section 165 (and this section).

(2)“Holding company” means a company that has one or more 51% subsidiaries.

(3)“Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.

(4)For the purposes of subsection (3) above “trading activities” means activities carried on by the company—

(a)in the course of, or for the purposes of, a trade being carried on by it,

(b)for the purposes of a trade that it is preparing to carry on,

(c)with a view to its acquiring or starting to carry on a trade, or

(d)with a view to its acquiring a significant interest in the share capital of another company that—

(i)is a trading company or the holding company of a trading group, and

(ii)if the acquiring company is a member of a group of companies, is not a member of that group.

(5)Activities do not qualify as trading activities under subsection (4)(c) or (d) above unless the acquisition is made, or the company starts to carry on the trade, as soon as is reasonably practicable in the circumstances.

(6)The reference in subsection (4)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company—

(a)such as would make that company a 51% subsidiary of the acquiring company, or

(b)such as would give the acquiring company a qualifying shareholding in a joint venture company without making the two companies members of the same group of companies.

(7)For the purpose of determining whether a company which has a qualifying shareholding in a joint venture company is a trading company—

(a)any holding by it of shares in the joint venture company is to be disregarded, and

(b)it is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is the holding company of a trading group, of the activities of that group;

and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the company.

(8)“Trading group” means a group of companies—

(a)one or more of whose members carry on trading activities, and

(b)the activities of whose members, taken together, do not include to a substantial extent activities other than trading activities.

(9)For the purposes of subsection (8) above “trading activities” means activities carried on by a member of the group—

(a)in the course of, or for the purposes of, a trade being carried on by any member of the group,

(b)for the purposes of a trade that any member of the group is preparing to carry on,

(c)with a view to any member of the group acquiring or starting to carry on a trade, or

(d)with a view to any member of the group acquiring a significant interest in the share capital of another company that—

(i)is a trading company or the holding company of a trading group, and

(ii)is not a member of the same group of companies as the acquiring company.

(10)Activities do not qualify as trading activities under subsection (9)(c) or (d) above unless the acquisition is made, or the group member in question starts to carry on the trade, as soon as is reasonably practicable in the circumstances.

(11)The reference in subsection (9)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company—

(a)such as would make that company a member of the same group of companies as the acquiring company, or

(b)such as would give the acquiring company a qualifying shareholding in a joint venture company without making the joint venture company a member of the same group of companies as the acquiring company.

(12)For the purpose of determining whether a group of companies is a trading group in a case where any one or more members of the group has a qualifying shareholding in a joint venture company which is not a member of the group—

(a)every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in it is to be disregarded, and

(b)each member of the group having such a qualifying shareholding is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is a holding company of a trading group, of the activities of that group;

and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the member of the group.

(13)For the purposes of this section the activities of the members of a group of companies are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities).

(14)In this section—

  • “51% subsidiary” has the meaning given by section 838 of the Taxes Act,

  • “group of companies” means a company which has one or more 51% subsidiaries together with those subsidiaries,

  • “joint venture company” means a company—

    (a)

    which is a trading company or the holding company of a trading group, and

    (b)

    75% or more of the ordinary share capital of which (in aggregate) is held by not more than 5 persons (the shareholdings of members of a group of companies being regarded for the purposes of this paragraph as held by a single company),

  • “ordinary share capital” has the meaning given by section 989 of ITA 2007,

  • “qualifying shareholding”, in relation to a company and a joint venture company, means—

    (a)

    the holding by the company of 10% or more of the ordinary share capital of the joint venture company, or

    (b)

    (where the company is a member of a group of companies) the holding by the company and the other members of the group (between them) of 10% or more of that ordinary share capital, and

  • “trade” means (subject to section 241(3)) anything which—

    (a)

    is a trade, profession or vocation, within the meaning of the Income Tax Acts, and

    (b)

    is conducted on a commercial basis and with a view to the realisation of profits.

35Omit section 214C (re-organisations of mutual business: gains not eligible for taper relief) and the heading before it.

36In section 228(8) (relief for employee share ownership trusts), for “meanings given by paragraph 22 of Schedule A1” substitute “same meaning as in section 165 (see section 165A)”.

37In section 241(3A) (furnished holiday lettings), omit “Schedule A1 (taper relief),”.

38In section 253(14)(b) (relief for loans to traders), for “meaning given by paragraph 22 of Schedule A1” substitute “same meaning as in section 165 (see section 165A)”.

39Omit section 261C(2)(a) (treating trading loss etc as CGT loss: meaning of “the maximum amount”).

40In section 279(2)(a) (foreign assets: delayed remittances), omit “(before the application of any taper relief)”.

41In section 279A(7)(b) (deferred unascertainable consideration: election for treatment of loss), for “any amounts that fall to be brought into account for that year under section 2(4)(b) by virtue of section 2(5)(b),” substitute “the total amount of chargeable gains treated as accruing in that year by virtue of section 87 or 89(2) (read, where appropriate, with section 10A),”.

42In section 279B(1) (provisions supplementary to section 279A), for paragraph (b) substitute—

(b)the person would be so chargeable if—

(i)chargeable gains accrued to the person in the year, and

(ii)the amount calculated under section 2(2) for the year in relation to the person exceeded the exempt amount for the year (within the meaning of section 3).

43(1)Section 279C (effect of election under section 279A) is amended as follows.

(2)For subsections (3) and (4) substitute—

(3)The amount of the relevant loss that falls to be deducted (in accordance with section 2(2)(a)) from the chargeable gains of the first eligible year is limited to the first year limit.

(4)The first year limit is the amount calculated under section 2(2) (read, where appropriate, with section 2(4)(a)) for the first eligible year.

(4A)For the purpose of making that calculation—

(a)no account is to be taken of the relevant loss, but

(b)the effect of any previous election under section 279A is to be taken into account.

(3)In subsection (6)(c), for “the provisions specified in subsection (8) below” substitute “amounts of chargeable gains treated as accruing in that later year by virtue of section 87 or 89(2) (read, where appropriate, with section 10A)”.

(4)Omit subsection (8).

(5)Omit subsection (10).

44Omit section 284B(1) (provisions supplementary to section 284A).

45Omit Schedule A1 (taper relief).

46Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.

47(1)Paragraph 6 (gains attributed to settlor) is amended as follows.

(2)In sub-paragraph (1), for “the tapered amount of any chargeable gains” substitute “the amount of any chargeable gains”.

(3)Omit sub-paragraph (1A).

48Omit paragraph 11 (taper relief).

49Omit Schedule 5BA (application of taper relief to enterprise investment scheme).

50Omit paragraph 15 of Schedule 7D (enterprise management incentives).

51In paragraph 45D(7) of Schedule 26 to FA 2002 (derivative contracts), for the words after “(6)” substitute ““holding company” and “trading company” have the same meaning as in section 165 of TCGA 1992 (see section 165A of that Act).”

52In paragraph 86(2) of Schedule 7 to ITEPA 2003 (transitionals and savings), omit the second sentence.

53Omit section 185G(3)(c) of FA 2004 (disposal by person holding taxable interest directly).

54Omit section 161(5) of ITA 2007 (other tax reliefs relating to EIS).

55In consequence of paragraphs 23 to 54, omit—

(a)in FA 1998—

(i)section 121(1) and (2),

(ii)section 140(5),

(iii)Schedule 20, and

(iv)paragraphs 2, 4, 6(3) and (4), 7 and 9 of Schedule 21,

(b)in FA 1999—

(i)section 72, and

(ii)Schedule 7,

(c)sections 66 and 67 of FA 2000,

(d)in FA 2001

(i)section 78, and

(ii)Schedule 26,

(e)in FA 2002—

(i)sections 46 and 47,

(ii)paragraph 5(13) of Schedule 9,

(iii)Schedule 10, and

(iv)paragraphs 2(2) and 4 to 6 of Schedule 11,

(f)in FA 2003

(i)section 160, and

(ii)paragraph 5 of Schedule 29,

(g)in Schedule 21 to FA 2004—

(i)paragraphs 3(4) and 8, and

(ii)in paragraph 10, in sub-paragraph (4), “, 8(2)” and sub-paragraph (6),

(h)paragraphs 13 and 27 of Schedule 12 to FA 2006, and

(i)paragraphs 313 and 343 of Schedule 1 to ITA 2007.

56(1)The amendments made by paragraph 31(2) and (3) have effect where the intervening year is the tax year 2008-09 or any subsequent tax year.

(2)The amendments made by paragraphs 41 and 43 have effect where the eligible year is the tax year 2008-09 or any subsequent tax year.

(3)The other amendments made by paragraphs 23 to 55 have effect in relation to chargeable gains accruing or treated as accruing in the tax year 2008-09 or any subsequent tax year.

Abolition of “kink” test

57TCGA 1992 is amended as follows.

58(1)Section 35 (assets held on 31 March 1982) is amended as follows.

(2)In subsection (2)—

(a)for “Subject to the following provisions of this section, in” substitute “In”, and

(b)for “him” substitute “that person”.

(3)After that subsection insert—

(2A)For the purposes of corporation tax, subsection (2) above has effect subject to subsections (3) to (8) below (and see also subsections (9) and (10)).

(4)In subsection (3)(d), for the words after “any of” substitute “the no gain/no loss provisions.”

(5)In subsection (4), for “him” substitute “that person”.

(6)In subsection (5), for “him” (in both places) substitute “that person”.

(7)In subsection (6), omit—

(a)paragraph (a),

(b)in paragraph (aa), “in the case of an election for the purposes of corporation tax,”, and

(c)in paragraph (b), “in either case”.

(8)In subsection (7), for “him” substitute “that person”.

(9)In subsection (9), after “effect” insert “for the purposes of corporation tax”.

(10)In subsection (10), insert at the end “for the purposes of capital gains tax and corporation tax”.

59After that section insert—

35ADisposal of asset acquired on no gain/no loss disposal

(1)This section applies for the purposes of capital gains tax in relation to a disposal of an asset if—

(a)the person making the disposal acquired the asset after 31 March 1982 and before 6 April 2008,

(b)the disposal by which the person acquired the asset (“the relevant disposal”), and any previous disposal of the asset after 31 March 1982, was a disposal on which, by virtue of any enactment, neither a gain nor a loss accrued to the person making the disposal, and

(c)section 35(2) did not apply to the relevant disposal.

(2)It is to be assumed that section 35(2) did apply to the relevant disposal (and that section 56(2) applied to the relevant disposal accordingly).

60In section 55(5) (indexation allowance: assets acquired on no gain/no loss disposal), for “enactments specified in section 35(3)(d)” substitute “no gain/no loss provisions”.

61In section 73(1) (death of life tenant: exclusion of chargeable gain), for “6th April 1965” substitute “31 March 1982”.

62In section 175(2C) (replacement of business assets by member of group), for “enactments specified in section 35(3)(d)” substitute “no gain/no loss provisions”.

63In section 288 (interpretation), after subsection (3) insert—

(3A)For the purposes of this Act, the following are “the no gain/no loss provisions”—

(a)sections 58, 73, 139, 140A, 140E, 171, 211, 215, 216, 217A, 218 to 221, 257(3), 258(4), 264 and 267(2) of this Act;

(b)section 148 of the 1979 Act;

(c)section 148 of the Finance Act 1982;

(d)section 130(3) of the Transport Act 1985;

(e)section 486(8) of the Taxes Act;

(f)paragraph 2(1) of Schedule 7 to the Broadcasting Act 1996;

(g)paragraphs 3 and 9 of Schedule 26 to the Transport Act 2000;

(h)paragraphs 3, 18, 29 and 32 of Schedule 9 to the Energy Act 2004;

(i)paragraph 9 of Schedule 4 to the Consumers, Estate Agents and Redress Act 2007.

64(1)Schedule 2 (assets held on 6 April 1965) is amended as follows.

(2)Omit paragraph 1(3).

(3)In paragraph 4—

(a)omit sub-paragraph (6),

(b)in sub-paragraph (8), for “him” substitute “the person”,

(c)in sub-paragraph (9)—

(i)for “either section 58 or” (in both places) substitute “section”,

(ii)omit “the spouse or civil partner of the holder, or”, and

(iii)for “him” substitute “the holder”,

(d)in sub-paragraph (10)(a), for “he” (in both places) substitute “the person”, and

(e)in sub-paragraph (11), omit—

(i)paragraph (a),

(ii)in paragraph (b), “in the case of an election for the purposes of corporation tax,”, and

(iii)in paragraph (c), “in either case,”.

(4)In paragraph 17(3) omit—

(a)paragraph (a),

(b)in paragraph (b), “in the case of an election for the purposes of corporation tax,”, and

(c)in paragraph (c), “in either case,”.

(5)Omit paragraph 22.

65(1)Schedule 3 (assets held on 31 March 1982) is amended as follows.

(2)In paragraph 1—

(a)in sub-paragraph (1)—

(i)for “Where—” substitute “For the purposes of corporation tax, where—”, and

(ii)for “he” (in each place) substitute “the person”, and

(b)in sub-paragraph (2), for “enactments specified in section 35(3)(d)” substitute “no gain/no loss provisions”.

(3)In paragraph 2(1) and (3), omit “58 or”.

66In paragraph 7 of Schedule 4 (deferred charges on pre-31 March 1982 gains), for “enactments specified in section 35(3)(d)” substitute “no gain/no loss provisions”.

67In paragraph 7 of Schedule 4ZA (sub-fund settlements), for “sections 104(1) and 109(2)(a)” substitute “section 104(1)”.

68In paragraph 12(b) of Schedule 7A (restriction on set-off or pre-entry losses), for “enactment specified in section 35(3)(d)” substitute “of the no gain/no loss provisions”.

69(1)FA 1997 is amended as follows.

(2)In section 89(8)(a) (earn-out rights), for “enactments specified in section 35(3)(d) of that Act” substitute “no gain/no loss provisions (within the meaning of that Act: see section 288(3A) of that Act)”.

(3)In paragraph 7(1)(b) of Schedule 12 (leasing arrangements: finance leases and loans), for “enactments specified in section 35(3)(d) of the Taxation of Chargeable Gains Act 1992” substitute “no gain/no loss provisions (within the meaning of the Taxation of Chargeable Gains Act 1992: see section 288(3A) of that Act)”.

70In consequence of paragraphs 57 to 69, omit—

(a)in F(No.2)A 1992

(i)section 46(2),

(ii)paragraph 21(2) of Schedule 9, and

(iii)paragraph 5(9) of Schedule 17,

(b)in FA 1994

(i)paragraph 2(2) of Schedule 24, and

(ii)paragraph 4(3) of Schedule 25,

(c)paragraph 2(3) of Schedule 4 to the Coal Industry Act 1994 (c. 21),

(d)paragraph 3 of Schedule 7 to the Broadcasting Act 1996 (c. 55),

(e)in the Transport Act 2000 (c. 38)

(i)paragraph 2(3) of Schedule 7, and

(ii)paragraph 37 of Schedule 26,

(f)paragraph 36 of Schedule 9 to the Energy Act 2004 (c. 20),

(g)paragraph 33 of Schedule 10 to the Railways Act 2005 (c. 14),

(h)section 59(2) of F(No.2)A 2005,

(i)paragraph 14(3) of Schedule 9 to FA 2007, and

(j)paragraph 11 of Schedule 7 to the Consumers, Estate Agents and Redress Act 2007 (c. 17).

71The amendments made by paragraphs 57 to 70 have effect in relation to disposals on or after 6 April 2008.

Abolition of “halving relief”

72TCGA 1992 is amended as follows.

73In section 36 (reduction of deferred charges where wholly or partly attributable to pre-31 March 1982 increase in value), for “tax” substitute “corporation tax in respect of chargeable gains”.

74(1)Schedule 4 (deferred charges on pre-31 March 1982 gains) is amended as follows.

(2)Before paragraph 1 insert—

Application of Schedule

A1This Schedule applies only for the purposes of corporation tax.

(3)In paragraph 2(5), omit—

(a)“, 162, 165”, and

(b)“of this Act and section 79 of the Finance Act 1980”.

(4)In paragraph 4(2), omit “168 (as modified by section 67(6)),”.

(5)In paragraph 9(1), omit—

(a)in paragraph (b), “in the case of a disposal made by, or a gain treated as accruing to, a person chargeable to corporation tax,”,

(b)paragraph (c), and

(c)“or (as the case may be) on or before such later date”.

75In consequence of paragraph 74, omit paragraph 43 of Schedule 21 to FA 1996.

76The amendments made by paragraphs 72 to 75 have effect in relation to disposals which occur on or after 6 April 2008 and to which Schedule 4 to TCGA 1992 would otherwise apply.

Abolition of indexation allowance

77TCGA 1992 is amended as follows.

78At the beginning of Chapter 4 of Part 2 (indexation allowance), insert—

52AChapter to apply only for corporation tax purposes

This Chapter applies only for the purposes of corporation tax.

79In section 53 (indexation allowance), omit—

(a)subsection (1A), and

(b)in subsection (4), “, 110A”.

80(1)Section 54 (calculation of indexation allowance) is amended as follows.

(2)In subsection (1), for “the relevant month” substitute “the month in which the disposal occurs”.

(3)Omit subsection (1A).

81(1)Section 145 (call options: indexation allowance) is amended as follows.

(2)In subsection (1), omit “(subject to subsection (1A) below)”.

(3)Omit subsection (1A).

82In consequence of the amendments made by paragraphs 77 to 81, omit section 122(1) to (3) and (5) of FA 1998.

83The amendments made by paragraphs 77 to 82 have effect in computing gains on disposals made on or after 6 April 2008.

Simplification of pooling etc

84TCGA 1992 is amended as follows.

85(1)Section 104 (share pooling: general interpretative provisions) is amended as follows.

(2)For subsections (2) and (2A) substitute—

(2)For the purposes of corporation tax, subsection (1) does not apply to any securities acquired by a company before 1 April 1982.

(2A)See also sections 105 to 105B and—

(a)section 106A in the case of capital gains tax, or

(b)sections 107 to 114 in the case of corporation tax.

(3)In subsection (3), omit “, 110A”.

(4)After that subsection insert—

(3A)For the purposes of capital gains tax section 35(2) applies in relation to a section 104 holding as if the reference to an asset were to any of the securities constituting or forming part of the section 104 holding which were held by the person making the disposal on 31 March 1982.

(5)In subsection (5), omit “, 110A”.

86In section 105 (disposal on or before day of acquisition), after subsection (2) insert—

(3)None of the securities which, by virtue of this section, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding.

87(1)Section 106A (identification of securities: general rules for capital gains tax) is amended as follows.

(2)After subsection (5) insert—

(5ZA)None of the securities which, by virtue of subsection (5) above, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding.

(3)In subsection (6), before “securities” (in each place) insert “relevant”.

(4)Omit subsection (7).

(5)Omit subsection (8).

(6)For subsection (10) substitute—

(10)In this section—

  • “securities” means any securities within the meaning of section 104 or any relevant securities, and

  • “relevant securities” means—

    (a)

    securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits),

    (b)

    qualifying corporate bonds, and

    (c)

    securities which are, or have at any time been, material interests in a non-qualifying offshore fund, within the meaning of Chapter 5 of Part 17 of the Taxes Act.

(7)In the heading, omit “general rules for”.

88In the heading of section 107 (identification of securities etc: general rules), insert at the end “for corporation tax”.

89In the heading of section 108 (identification of relevant securities), insert at the end “for corporation tax”.

90(1)Section 109 (pre-April 1982 share pools) is amended as follows.

(2)In subsection (1), for “This” substitute “For the purposes of corporation tax, this”.

(3)In the heading, for “Pre-April” substitute “Corporation tax: pre-April”.

91For the heading of section 110 substitute “Indexation for section 104 holdings for corporation tax”.

92Omit section 110A (indexation for section 104 holdings: CGT).

93In the heading of section 112 (parallel pooling regulations), insert at the end “: corporation tax”.

94(1)Section 113 (calls on shares) is amended as follows.

(2)Before subsection (1) insert—

(A1)This section has effect for the purposes of corporation tax.

(3)In the heading, insert at the end “: corporation tax”.

95(1)Section 114 (consideration for options) is amended as follows.

(2)Before subsection (1) insert—

(A1)This section has effect for the purposes of corporation tax.

(3)In the heading, insert at the end “: corporation tax”.

96In FA 1998, omit—

(a)section 123(1) and (2), and

(b)section 125(2) and (3).

97Chapter 6 of Part 4 of ITA 2007 (losses on disposals of shares) is amended as follows.

98(1)Section 147 (limits on share loss relief) is amended as follows.

(2)In subsection (1)(b)—

(a)in sub-paragraph (i), omit “or a 1982 holding” and “or” at the end, and

(b)for sub-paragraph (ii) substitute—

(ii)at a time earlier than the time of the disposal but after 5 April 2008 formed part of a section 104 holding, or

(iii)at a time earlier than that time and than 6 April 2008 formed part of an old section 104 holding or a 1982 holding, and.

(3)In subsection (7)—

(a)in the definition of “section 104 holding”, after “1992” insert “and “old section 104 holding” is a holding that was a section 104 holding within the meaning of that provision as it applied in relation to disposals before 6 April 2008”, and

(b)in the definition of “1982 holding”, insert at the end “as it applied in relation to disposals before 6 April 2008”.

99(1)Section 148 (disposal of shares forming part of mixed holding) is amended as follows.

(2)In subsection (3)(a)(ii), omit “or a 1982 holding”.

(3)In subsection (5), omit “or 1982”.

(4)In subsection (9), for “and “1982 holding” have” substitute “has”.

100The amendments made by paragraphs 84 to 99 have effect in relation to disposals on or after 6 April 2008.

Meaning of “tax year”

101(1)Section 288 of TCGA 1992 (interpretation) is amended as follows.

(2)In subsection (1), for the definition of “year of assessment” substitute—

“year of assessment” means tax year;.

(3)After that subsection insert—

(1ZA)In this Act and other enactments relating to capital gains tax “tax year” means a year beginning on 6 April and ending on the following 5 April; and “the tax year 2008-09” means the tax year beginning on 6 April 2008 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

102In consequence of the amendments made by paragraph 101, omit—

(a)the definition of “tax year” in section 41(1) of FA 2005, and

(b)paragraph 342(2)(i) of Schedule 1 to ITA 2007.

Section 9

SCHEDULE 3Entrepreneurs' relief

Introduction

1TCGA 1992 is amended as follows.

Main provisions

2In Part 5 (transfer of business assets), after section 169G insert—

Chapter 3Entrepreneurs' relief

169HIntroduction

(1)This Chapter provides relief from capital gains tax in respect of qualifying business disposals (to be known as “entrepreneurs' relief”).

(2)The following are qualifying business disposals—

(a)a material disposal of business assets: see section 169I,

(b)a disposal of trust business assets: see section 169J, and

(c)a disposal associated with a relevant material disposal: see section 169K.

(3)But in the case of certain qualifying business disposals, entrepreneurs' relief is given only in respect of disposals of relevant business assets comprised in the qualifying business disposal: see section 169L.

(4)Section 169M makes provision requiring the making of a claim for entrepreneurs' relief.

(5)Sections 169N to 169P make provision as to the amount of entrepreneurs' relief.

(6)Sections 169Q and 169R make provision about reorganisations.

(7)Section 169S contains interpretative provisions for the purposes of this Chapter.

169IMaterial disposal of business assets

(1)There is a material disposal of business assets where—

(a)an individual makes a disposal of business assets (see subsection (2)), and

(b)the disposal of business assets is a material disposal (see subsections (3) to (7)).

(2)For the purposes of this Chapter a disposal of business assets is—

(a)a disposal of the whole or part of a business,

(b)a disposal of (or of interests in) one or more assets in use, at the time at which a business ceases to be carried on, for the purposes of the business, or

(c)a disposal of one or more assets consisting of (or of interests in) shares in or securities of a company.

(3)A disposal within paragraph (a) of subsection (2) is a material disposal if the business is owned by the individual throughout the period of 1 year ending with the date of the disposal.

(4)A disposal within paragraph (b) of that subsection is a material disposal if—

(a)the business is owned by the individual throughout the period of 1 year ending with the date on which the business ceases to be carried on, and

(b)that date is within the period of 3 years ending with the date of the disposal.

(5)A disposal within paragraph (c) of subsection (2) is a material disposal if condition A or B is met.

(6)Condition A is that, throughout the period of 1 year ending with the date of the disposal—

(a)the company is the individual’s personal company and is either a trading company or the holding company of a trading group, and

(b)the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group.

(7)Condition B is that the conditions in paragraphs (a) and (b) of subsection (6) are met throughout the period of 1 year ending with the date on which the company—

(a)ceases to be a trading company without continuing to be or becoming a member of a trading group, or

(b)ceases to be a member of a trading group without continuing to be or becoming a trading company,

and that date is within the period of 3 years ending with the date of the disposal.

(8)For the purposes of this section—

(a)an individual who disposes of (or of interests in) assets used for the purposes of a business carried on by the individual on entering into a partnership which is to carry on the business is to be treated as disposing of a part of the business,

(b)the disposal by an individual of the whole or part of the individual’s interest in the assets of a partnership is to be treated as a disposal by the individual of the whole or part of the business carried on by the partnership, and

(c)at any time when a business is carried on by a partnership, the business is to be treated as owned by each individual who is at that time a member of the partnership.

169JDisposal of trust business assets

(1)There is a disposal of trust business assets where—

(a)the trustees of a settlement make a disposal of settlement business assets (see subsection (2)),

(b)there is an individual who is a qualifying beneficiary (see subsection (3)), and

(c)the relevant condition is met (see subsections (4) and (5)).

(2)In this Chapter “settlement business assets” means—

(a)assets consisting of (or of interests in) shares in or securities of a company, or

(b)assets (or interests in assets) used or previously used for the purposes of a business,

which are part of the settled property.

(3)An individual is a qualifying beneficiary if the individual has, under the settlement, an interest in possession (otherwise than for a fixed term) in—

(a)the whole of the settled property, or

(b)a part of it which consists of or includes the settlement business assets disposed of.

(4)In relation to a disposal of settlement business assets within paragraph (a) of subsection (2) the relevant condition is that, throughout a period of 1 year ending not earlier than 3 years before the date of the disposal—

(a)the company is the qualifying beneficiary’s personal company and is either a trading company or the holding company of a trading group, and

(b)the qualifying beneficiary is an officer or employee of the company or (if the company is a member of a group of companies) of one or more companies which are members of the trading group.

(5)In relation to a disposal of settlement business assets within paragraph (b) of that subsection, the relevant condition is that—

(a)the settlement business assets are used for the purposes of the business carried on by the qualifying beneficiary throughout the period of 1 year ending not earlier than 3 years before the date of the disposal, and

(b)the qualifying beneficiary ceases to carry on the business on the date of the disposal or within the period of three years before that date.

(6)In subsection (5)—

(a)the reference to a business carried on by the qualifying beneficiary includes a business carried on by a partnership of which the qualifying beneficiary is a member, and

(b)the reference to the qualifying beneficiary ceasing to carry on the business includes the qualifying beneficiary ceasing to be a member of the partnership or the partnership ceasing to carry on the business.

169KDisposal associated with relevant material disposal

(1)There is a disposal associated with a relevant material disposal if conditions A, B and C are met.

(2)Condition A is that an individual makes a material disposal of business assets which consists of—

(a)the disposal of the whole or part of the individual’s interest in the assets of a partnership, or

(b)the disposal of (or of interests in) shares in or securities of a company.

(3)Condition B is that the individual makes the disposal as part of the withdrawal of the individual from participation in the business carried on by the partnership or by the company or (if the company is a member of a trading group) a company which is a member of the trading group.

(4)Condition C is that, throughout the period of 1 year ending with the earlier of—

(a)the date of the material disposal of business assets, and

(b)the cessation of the business of the partnership or company,

the assets which (or interests in which) are disposed of are in use for the purposes of the business.

(5)For the purposes of this Chapter the disposal mentioned in Condition B is the disposal associated with a relevant material disposal.

169LRelevant business assets

(1)If a qualifying business disposal is one which does not consist of the disposal of (or of interests in) shares in or securities of a company, entrepreneurs' relief is given only in respect of the disposal of relevant business assets comprised in the qualifying business disposal.

(2)In this Chapter “relevant business assets” means assets (including goodwill) which are, or are interests in, assets to which subsection (3) applies, other than excluded assets (see subsection (4) below).

(3)This subsection applies to assets which—

(a)in the case of a material disposal of business assets, are assets used for the purposes of a business carried on by the individual or a partnership of which the individual is a member,

(b)in the case of a disposal of trust business assets, are assets used for the purposes of a business carried on by the qualifying beneficiary or a partnership of which the qualifying beneficiary is a member, or

(c)in the case of a disposal associated with a relevant material disposal, are assets used for the purposes of a business carried on by the partnership or company.

(4)The following are excluded assets—

(a)shares and securities, and

(b)assets, other than shares or securities, which are held as investments.

169MRelief to be claimed

(1)Entrepreneurs' relief is to be given only on the making of a claim.

(2)A claim for entrepreneurs' relief in respect of a qualifying business disposal must be made—

(a)in the case of a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and

(b)otherwise, by the individual.

(3)A claim for entrepreneurs' relief in respect of a qualifying business disposal must be made on or before the first anniversary of the 31 January following the tax year in which the qualifying business disposal is made.

(4)A claim for entrepreneurs' relief in respect of a qualifying business disposal may only be made if the amount resulting under section 169N(1) is a positive amount.

169NAmount of relief: general

(1)Where a claim is made in respect of a qualifying business disposal—

(a)the relevant gains (see subsection (5)) are to be aggregated, and

(b)any relevant losses (see subsection (6)) are to be aggregated and deducted from the aggregate arrived at under paragraph (a).

(2)The resulting amount is to be reduced by 4/9ths.

(3)But if the aggregate of—

(a)the amount resulting under subsection (1), and

(b)the total of the amounts resulting under that subsection by virtue of its operation in relation to earlier relevant qualifying business disposals (if any),

exceeds £1 million, the reduction is to be made in respect of only so much (if any) of the amount resulting under subsection (1) as (when added to that total) does not exceed £1 million.

(4)The amount arrived at under subsections (1) to (3) is to be treated for the purposes of this Act as a chargeable gain accruing at the time of the disposal to the individual or trustees by whom the claim is made.

(5)In subsection (1)(a) “relevant gains” means—

(a)if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), the gains accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of chargeable gains), and

(b)otherwise, the gains accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed).

(6)In subsection (1)(b) “relevant losses” means—

(a)if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), any losses accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of allowable losses, on the assumption that notice has been given under section 16(2A) in respect of them), and

(b)otherwise, any losses accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed, on that assumption).

(7)In subsection (3) “earlier relevant qualifying business disposals” means—

(a)where the qualifying business disposal is made by an individual, earlier qualifying business disposals made by the individual and earlier disposals of trust business assets in respect of which the individual is the qualifying beneficiary, and

(b)where the qualifying business disposal is a disposal of trust business assets in respect of which an individual is the qualifying beneficiary, earlier disposals of trust business assets in respect of which that individual is the qualifying beneficiary and earlier qualifying business disposals made by that individual.

(8)If, on the same day, there is both a disposal of trust business assets in respect of which an individual is the qualifying beneficiary and a qualifying business disposal by the individual, this section applies as if the disposal of trust business assets were later.

(9)Any gain or loss taken into account under subsection (1) is not to be taken into account under this Act as a chargeable gain or an allowable loss.

169OAmount of relief: special provisions for certain trust disposals

(1)This section applies where, on a disposal of trust business assets, there is (in addition to the qualifying beneficiary) at least one other beneficiary who, at the material time, has an interest in possession in—

(a)the whole of the settled property, or

(b)a part of it which consists of or includes the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of.

(2)Only the relevant proportion of the amount which would otherwise result under subsection (1) of section 169N is to be treated as so resulting.

(3)And the balance of that amount, with no reduction under subsection (2) of that section, is accordingly a chargeable gain for the purposes of this Act.

(4)For the purposes of this section “the relevant proportion” of an amount is the same proportion of the amount as that which, at the material time—

(a)the qualifying beneficiary’s interest in the income of the part of the settled property comprising the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of, bears to

(b)the interests in that income of all the beneficiaries (including the qualifying beneficiary) who then have interests in possession in that part of the settled property.

(5)In subsection (4) “the qualifying beneficiary’s interest” means the interest by virtue of which he is the qualifying beneficiary (and not any other interest the qualifying beneficiary may have).

(6)In this section “the material time” means the end of the latest period of 1 year which ends not earlier than 3 years before the date of the disposal and—

(a)in the case of a disposal of settlement business assets within paragraph (a) of subsection (2) of section 169J, throughout which the conditions in paragraphs (a) and (b) of subsection (4) of that section are met, and

(b)in the case of a disposal of settlement business assets within paragraph (b) of subsection (2) of that section, throughout which the business is carried on by the qualifying beneficiary.

169PAmount of relief: special provision for certain associated disposals

(1)This section applies where, on a disposal associated with a relevant material disposal, any of the conditions in subsection (4) is met.

(2)Only such part of the amount which would otherwise result under subsection (1) of section 169N as is just and reasonable is to be treated as so resulting.

(3)And the balance of that amount, with no reduction under subsection (2) of that section, is accordingly a chargeable gain for the purposes of this Act.

(4)The conditions referred to in subsection (1) are—

(a)that the assets which (or interests in which) are disposed of are in use for the purposes of the business for only part of the period in which they are in the ownership of the individual,

(b)that only part of the assets which (or interests in which) are disposed of are in use for the purposes of the business for that period,

(c)that the individual is concerned in the carrying on of the business (whether personally, as a member of a partnership or as an officer or employee of a company which is the individual’s personal company) for only part of the period in which the assets which (or interests in which) are disposed of are in use for the purposes of the business, and

(d)that, for the whole or any part of the period for which the assets which (or interests in which) are disposed of are in use for the purposes of the business, their availability is dependent on the payment of rent.

(5)In determining how much of an amount it is just and reasonable to bring into account under subsection (2) regard is to be had to—

(a)in a case within paragraph (a) of subsection (4), the length of the period for which the assets are in use as mentioned in that paragraph,

(b)in a case within paragraph (b) of that subsection, the part of the assets that are in use as mentioned in that paragraph,

(c)in a case within paragraph (c) of that subsection, the length of the period for which the individual is concerned in the carrying on of the business as mentioned in that paragraph, and

(d)in a case within paragraph (d) of that subsection, the extent to which any rent paid is less than the amount which would be payable in the open market for the use of the assets.

169QReorganisations: disapplication of section 127

(1)This section applies where—

(a)there is a reorganisation (within the meaning of section 126), and

(b)the original shares and the new holding (within the meaning of that section) would fall to be treated by virtue of section 127 as the same asset.

(2)If an election is made under this section, a claim for entrepreneurs' relief may be made as if the reorganisation involved a disposal of the original shares; and if such a claim is made section 127 does not apply.

(3)An election under this section must be made—

(a)if the reorganisation would (apart from section 127) involve a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and

(b)otherwise, by the individual.

(4)An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the reorganisation takes place.

(5)The references in this section to a reorganisation (within the meaning of section 126) includes an exchange of shares or securities which is treated as such a reorganisation by virtue of section 135 or 136.

169RReorganisations involving acquisition of qualifying corporate bonds

(1)This section applies where the calculation under section 116(10)(a) has effect to produce a chargeable gain for an individual by reason of a relevant transaction.

(2)This Chapter has effect as if—

(a)(despite section 116(10)) the relevant transaction were a disposal, and

(b)the disposal were a disposal of business assets consisting of the old asset made by the individual at the time of the relevant transaction.

(3)Where the disposal would be a material disposal of business assets and entrepreneurs' relief is claimed in respect of it—

(a)the amount resulting under section 169N(1) is to be taken to be the amount of the chargeable gain produced by the calculation under section 116(10)(a), and

(b)accordingly, the amount arrived at under section 169N(1) to (3) (or a corresponding part of it) is the amount deemed to accrue by virtue of section 116(10)(b) on a disposal of the whole or part of the new asset.

(4)In this section “new asset”, “old asset” and “relevant transaction” have the meaning given by section 116.

169SInterpretation of Chapter

(1)For the purposes of this Chapter “a business” means anything which—

(a)is a trade, profession or vocation, and

(b)is conducted on a commercial basis and with a view to the realisation of profits.

(2)References in this Chapter to a disposal of an interest in shares in a company include a disposal of an interest in shares treated as made by virtue of section 122.

(3)For the purposes of this Chapter “personal company”, in relation to an individual, means a company—

(a)at least 5% of the ordinary share capital of which is held by the individual, and

(b)at least 5% of the voting rights in which are exercisable by the individual by virtue of that holding.

(4)For the purposes of subsection (3) if the individual holds any shares in the company jointly or in common with one or more other persons, the individual is to be treated as sole holder of so many of them as is proportionate to the value of the individual’s share (and as able to exercise voting rights by virtue of that holding).

(5)In this Chapter—

  • “disposal associated with a relevant material disposal” has the meaning given by section 169K,

  • “disposal of business assets” has the meaning given by section 169I(2),

  • “disposal of trust business assets” has the meaning given by section 169J,

  • “employment” has the meaning given by section 4 of ITEPA 2003,

  • “entrepreneurs' relief” has the meaning given by section 169H(1),

  • “holding company” has the same meaning as in section 165 (see section 165A),

  • “material disposal of business assets” has the meaning given by section 169I,

  • “office” has the meaning given by section 5(3) of ITEPA 2003,

  • “ordinary share capital” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007),

  • “qualifying business disposal” has the meaning given by section 169H(2),

  • “relevant business asset” has the meaning given by section 169L,

  • “rent”, in relation to an asset, includes any form of consideration given for the use of the asset,

  • “securities”, in relation to a company, includes any debentures of the company which are deemed by subsection (6) of section 251 to be securities for the purposes of that section,

  • “settlement business assets” has the meaning given by section 169J(2),

  • “trade” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007), and

  • “trading company” and “trading group” have the same meaning as in section 165 (see section 165A).

Other amendments

3In section 241(3A) (furnished holiday lettings), after the entry relating to section 165 insert—

section 169S(1) (entrepreneurs' relief),.

4In paragraph 1(1)(b) of Schedule 5B (enterprise investment scheme: re-investment), after “164FA,” insert “section 169N,”.

Commencement

5The amendments made by this Schedule have effect in relation to disposals, reorganisations (within the meaning of section 169Q of TCGA 1992) and relevant transactions (within the meaning of section 116 of TCGA 1992) taking place on or after 6 April 2008.

Transitionals: section 169P(4)(d)

6Section 169P of TCGA 1992 has effect in a case where the period for which the assets are in use for the purposes of the business began before 6 April 2008 as if the reference in subsection (4)(d) of that section to that period were to so much of it as falls on or after that date.

Transitionals: reorganisations

7(1)This paragraph applies where, by virtue of section 116(10)(b), a chargeable gain is deemed to accrue to an individual on a disposal made on or after 6 April 2008 (a “relevant disposal”) by reason of a relevant transaction to which the individual was a party taking place before that date.

(2)Subject as follows, Chapter 3 of Part 5 (as inserted by this Schedule) has effect as if—

(a)(despite section 116(10)) the relevant transaction were a disposal of the old asset made by the individual,

(b)that Chapter applied in relation to that disposal (even though made before 6 April 2008), and

(c)for the purposes of the time limit for making a claim for entrepreneurs' relief, that disposal were made at the time of the first relevant disposal.

(3)In sub-paragraph (2) “the first relevant disposal” means the first disposal made on or after 6 April 2008 on which a chargeable gain is deemed to accrue to the individual by reason of the relevant transaction.

(4)Where entrepreneurs' relief is claimed by virtue of this paragraph—

(a)the amount of the chargeable gain produced by the calculation under section 116(10)(a), reduced by

(b)any amount deemed to accrue under section 116(10)(b) and (12) before 6 April 2008 by reason of the relevant transaction,

is to be treated as constituting the amount resulting under section 169N(1).

(5)Accordingly (but subject as follows), the amount of the chargeable gain which is deemed to accrue by virtue of section 116(10)(b) on the relevant disposal is that arrived at under section 169N(1) to (3) (in accordance with sub-paragraph (4)).

(6)The amount of the chargeable gain which is deemed to accrue by virtue of section 116(10)(b) on the relevant disposal is the amount specified in sub-paragraph (7)—

(a)except in a case within paragraph (b), where the relevant disposal is not a disposal of the whole of the new asset, and

(b)in a case in which part of the new asset was disposed of before 6 April 2008, where the relevant disposal is not a disposal of the whole of the part not so disposed of.

(7)The amount referred to in sub-paragraph (6) is the appropriate proportion of the amount in sub-paragraph (5); and “the appropriate proportion” means the proportion of the new asset, or of so much of the new asset as was not disposed of before 6 April 2008, which is disposed of on the relevant disposal.

(8)In this paragraph—

  • “new asset”,

  • “old asset”, and

  • “relevant transaction”,

have the meaning given by section 116.

(9)References in this paragraph to any provision are to be read as they would be if this paragraph formed part of TCGA 1992.

Transitionals: EIS and VCT

8(1)This paragraph applies where there is a relevant chargeable event in a case in which the original gain would, apart from Schedule 5B (enterprise investment scheme) or Schedule 5C (venture capital trusts), have accrued before 6 April 2008.

(2)“Relevant chargeable event” means a chargeable event under—

(a)paragraph 3(1) of Schedule 5B, or

(b)paragraph 3(1) of Schedule 5C,

which occurs on or after 6 April 2008 in relation to any of the relevant shares held by the investor immediately before the first relevant chargeable event.

(3)In this paragraph “the first relevant chargeable event” means the first relevant chargeable event in the case.

(4)The following provisions apply if—

(a)the relevant disposal would have been a material disposal of business assets had Chapter 3 of Part 5 applied in relation to it (even though made before 6 April 2008), and

(b)a claim is made on or before the first anniversary of the 31 January following the tax year in which the first relevant chargeable event occurs.

(5)In this paragraph “the relevant disposal” means—

(a)where the original gain would have accrued in accordance with section 164F or 164FA, paragraphs 4 and 5 of Schedule 5B or paragraphs 4 and 5 of Schedule 5C (the “original gain event”), the relevant underlying disposal, and

(b)otherwise, the disposal on which the original gain would have accrued (“the original gain disposal”).

(6)In sub-paragraph (5)(a) “the relevant underlying disposal” means the disposal (not being a disposal within paragraph 3 of Schedule 5B or 5C) by virtue of which Schedule 5B or 5C has effect.

(7)Subject as follows, the amount treated as accruing on the relevant chargeable event in respect of the original gain event or original gain disposal is the amount which would be arrived at under section 169N(1) to (3) if—

(a)the relevant chargeable event were a qualifying business disposal (within the meaning of Chapter 3 of Part 5), and

(b)the relevant proportion of the postponed gain constituted the amount resulting under section 169N(1);

and “the relevant proportion” means the proportion of the relevant shares which is held by the investor immediately before the first relevant chargeable event.

(8)The amount treated as accruing on the relevant chargeable event in respect of the original gain event or original gain disposal is that specified in sub-paragraph (9) where the relevant chargeable event is not a chargeable event in relation to all the relevant shares held by the investor immediately before the first relevant chargeable event.

(9)The amount referred to in sub-paragraph (8) is the appropriate proportion of the amount in sub-paragraph (7); and “the appropriate proportion” means the proportion of the relevant shares held by the investor immediately before the first relevant chargeable event as respects which the relevant chargeable event is a chargeable event.

(10)In this paragraph—

  • “chargeable event” is to be construed in accordance with paragraph 3 of Schedule 5B or paragraph 3 of Schedule 5C,

  • “investor” has the same meaning as in paragraph 1 of Schedule 5B or paragraph 1 of Schedule 5C,

  • “the original gain” has the same meaning as in paragraph 1 of Schedule 5B or paragraph 1 of Schedule 5C,

  • “the postponed gain” means so much of the original gain as is treated by paragraph 2(2)(a) of Schedule 5B or paragraph 2(2)(a) of Schedule 5C as not having accrued at the accrual time, and

  • “relevant shares” has the same meaning as in Schedule 5B or Schedule 5C.

(11)References in this paragraph to any provision are to be read as they would be if this paragraph formed part of TCGA 1992.

Section 10

SCHEDULE 4Inheritance tax: transfer of nil-rate band etc

Amendments of IHTA 1984

1IHTA 1984 is amended as follows.

2After section 8 insert—

8ATransfer of unused nil-rate band between spouses and civil partners

(1)This section applies where—

(a)immediately before the death of a person (a “deceased person”), the deceased person had a spouse or civil partner (“the survivor”), and

(b)the deceased person had unused nil-rate band on death.

(2)A person has unused nil-rate band on death if—

M>VT

where—

  • M is the maximum amount that could be transferred by a chargeable transfer made (under section 4 above) on the person’s death if it were to be wholly chargeable to tax at the rate of nil per cent. (assuming, if necessary, that the value of the person’s estate were sufficient but otherwise having regard to the circumstances of the person); and

  • VT is the value actually transferred by the chargeable transfer so made (or nil if no chargeable transfer is so made).

(3)Where a claim is made under this section, the nil-rate band maximum at the time of the survivor’s death is to be treated for the purposes of the charge to tax on the death of the survivor as increased by the percentage specified in subsection (4) below (but subject to subsection (5) and section 8C below).

(4)That percentage is—

where—

  • E is the amount by which M is greater than VT in the case of the deceased person; and

  • NRBMD is the nil-rate band maximum at the time of the deceased person’s death.

(5)If (apart from this subsection) the amount of the increase in the nil-rate band maximum at the time of the survivor’s death effected by this section would exceed the amount of that nil-rate band maximum, the amount of the increase is limited to the amount of that nil-rate band maximum.

(6)Subsection (5) above may apply either—

(a)because the percentage mentioned in subsection (4) above (as reduced under section 8C below where that section applies) is more than 100 because of the amount by which M is greater than VT in the case of one deceased person, or

(b)because this section applies in relation to the survivor by reference to the death of more than one person who had unused nil-rate band on death.

(7)In this Act “nil-rate band maximum” means the amount shown in the second column in the first row of the Table in Schedule 1 to this Act (upper limit of portion of value charged at rate of nil per cent.) and in the first column in the second row of that Table (lower limit of portion charged at next rate).

8BClaims under section 8A

(1)A claim under section 8A above may be made—

(a)by the personal representatives of the survivor within the permitted period, or

(b)(if no claim is so made) by any other person liable to the tax chargeable on the survivor’s death within such later period as an officer of Revenue and Customs may in the particular case allow.

(2)If no claim under section 8A above has been made in relation to a person (P) by reference to whose death that section applies in relation to the survivor, the claim under that section in relation to the survivor may include a claim under that section in relation to P if that does not affect the tax chargeable on the value transferred by the chargeable transfer of value made on P’s death.

(3)In subsection (1)(a) above “the permitted period” means—

(a)the period of two years from the end of the month in which the survivor dies or (if it ends later) the period of three months beginning with the date on which the personal representatives first act as such, or

(b)such longer period as an officer of Revenue and Customs may in the particular case allow.

(4)A claim made within either of the periods mentioned in subsection (3)(a) above may be withdrawn no later than one month after the end of the period concerned.

8CSection 8A and subsequent charges

(1)This section applies where—

(a)the conditions in subsection (1)(a) and (b) of section 8A above are met, and

(b)after the death of the deceased person, tax is charged on an amount under any of sections 32, 32A and 126 below by reference to the rate or rates that would have been applicable to the amount if it were included in the value transferred by the chargeable transfer made (under section 4 above) on the deceased person’s death.

(2)If the tax is charged before the death of the survivor, the percentage referred to in subsection (3) of section 8A above is (instead of that specified in subsection (4) of that section)—

where—

  • E and NRBMD have the same meaning as in subsection (4) of that section;

  • TA is the amount on which tax is charged; and

  • NRBME is the nil-rate band maximum at the time of the event occasioning the charge.

(3)If this section has applied by reason of a previous event or events, the reference in subsection (2) to the fraction

is to the aggregate of that fraction in respect of the current event and the previous event (or each of the previous events).

(4)If the tax is charged after the death of the survivor, it is charged as if the personal nil-rate band maximum of the deceased person were appropriately reduced.

(5)In subsection (4) above—

  • “the personal nil-rate band maximum of the deceased person” is the nil rate band maximum which is treated by Schedule 2 to this Act as applying in relation to the deceased person’s death, increased in accordance with section 8A above where that section effected an increase in that nil-rate band maximum in the case of the deceased person (as survivor of another deceased person), and

  • “appropriately reduced” means reduced by the amount (if any) by which the amount on which tax was charged at the rate of nil per cent. on the death of the survivor was increased by reason of the operation of section 8A above by virtue of the position of the deceased person.

3In section 147 (Scotland: legitim etc), insert at the end—

(10)Where the application of subsection (4) in relation to the estate of a person means that too great an increase has been made under subsection (3) of section 8A above in the case of another person, the claim under that section in that case may be amended accordingly by the Commissioners for Her Majesty’s Revenue and Customs.

4(1)Section 151BA (rates of charge under section 151B) is amended as follows.

(2)In subsection (5), for “had been in force at the time of the member’s death” substitute “(“the applicable Table”) had been in force at the time of the member’s death, but subject to subsections (6) and (9) below.”

(3)After that subsection insert—

(6)The nil-rate band maximum in the applicable Table is to be treated for the purposes of this section as reduced by the used-up percentage of the difference between—

(a)that nil-rate band maximum, and

(b)the nil-rate band maximum which was actually in force at the time of the member’s death.

(7)For the purposes of subsection (6) above “the used-up percentage” is—

100 - ENRBM × 100

where—

  • E is the amount by which M is greater than VT under section 8A(2) above in the case of the member; and

  • NRBM is the nil-rate band maximum at the time of the member’s death.

(4)After subsection (7) insert—

(8)The following provisions apply where—

(a)tax is charged under section 151B above, and

(b)immediately before the member’s death, the member had a spouse or civil partner (“the survivor”).

(9)If the survivor died before the event giving rise to the charge, tax is charged as if the personal nil-rate band maximum of the member were appropriately reduced.

(10)In subsection (9) above—

  • “the personal nil-rate band maximum of the member” is the nil rate band maximum in the applicable Table, increased in accordance with section 8A above where that section effected an increase in that nil-rate band maximum in the case of the member (as a survivor of another deceased person), and

  • “appropriately reduced” means reduced by the amount (if any) by which the amount on which tax was charged at the rate of nil per cent. on the death of the survivor was increased by reason of the operation of section 8A above by virtue of the position of the member.

(11)If the survivor did not die before the event giving rise to the charge, tax is to be charged on the death of the survivor as if the percentage referred to in section 8A(3) above in the case of the member were that specified in subsection (12) below.

(12)That percentage is—

where—

  • AE is the adjusted excess, that is the amount by which M would be greater than VT under section 8A(2) above in the case of the member if—

    (a)

    the taxable amount were included in the value transferred by the chargeable transfer made on the member’s death, and

    (b)

    the nil-rate band maximum at the time of the member’s death were ANRBM; and

  • ANRBM is the adjusted nil-rate band maximum, that is the nil-rate band maximum in the applicable Table (as reduced under subsection (6) above where that subsection applies).

5In section 239(4) (certificates of discharge: cases where further tax not affected), after paragraph (a) (but before the “or”) insert—

(aa)that may afterwards be shown to be payable by reason of too great an increase having been made under section 8A(3) above,.

6In section 247(2) (tax-geared penalty), after “liable” insert “, or for which any other person is liable by virtue of the operation of section 8A above,”.

7In section 272 (general interpretation), insert at the appropriate place—

“nil-rate band maximum” has the meaning given by section 8A(7);.

Amendment of TCGA 1992

8In section 274 of TCGA 1992 (value determined for inheritance tax), for “that tax” substitute “the application of that tax to the estate”.

Commencement

9(1)The amendments made by paragraphs 2, 3 and 4(4) have effect in relation to cases where the survivor’s death occurs on or after 9 October 2007.

(2)The amendments made by paragraphs 4(2) and (3) have effect in relation to deaths, cases where scheme administrators become aware of deaths and cessations of dependency occurring on or after 6 April 2008.

(3)The amendments made by paragraphs 5 and 7 are to be treated as having come into force on 9 October 2007.

(4)The amendment made by paragraph 8 has effect in relation to any ascertainment of value made on or after 6 April 2008.

Modifications for cases where deceased person died before 25 July 1986

10(1)Section 8A of IHTA 1984 (as inserted by paragraph 2) has effect in relation to cases where the deceased person died before 25 July 1986 (and the survivor dies on or after 9 October 2007) subject as follows.

(2)Where the deceased person died on or after 1 January 1985—

(a)the references in subsection (2) to a chargeable transfer made under section 4 of IHTA 1984 are to a chargeable transfer made under section 4 of CTTA 1984, and

(b)the reference in subsection (4) to the nil-rate band maximum is to the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to that Act.

(3)Where the deceased person died on or after 13 March 1975 and before 1 January 1985—

(a)the references in subsection (2) to a chargeable transfer made under section 4 of IHTA 1984 are to a chargeable transfer made under section 22 of FA 1975, and

(b)the reference in subsection (4) to the nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of that Act.

(4)Where the deceased person died on or after 16 April 1969 and before 13 March 1975, section 8A applies as if—

(a)M were the amount specified in paragraph (a) in Part 1 of Schedule 17 to FA 1969 at the time of the deceased person’s death,

(b)VT were the aggregate principal value of all property comprised in the estate of the deceased person for the purposes of estate duty, and

(c)the reference in subsection (4) to the nil-rate band maximum were to the amount mentioned in paragraph (a).

(5)Where the deceased person died before 16 April 1969, section 8A applies as if—

(a)M were the amount specified as the higher figure in the first line, and the lower figure in the second line, in the first column of the scale in section 17 of FA 1894 at the time of the deceased person’s death,

(b)VT were the principal value of the estate of the deceased person for the purposes of estate duty, and

(c)the reference in subsection (4) to the nil-rate band maximum were to the figure mentioned in paragraph (a).

11(1)Section 8C of IHTA 1984 (as inserted by paragraph 2) has effect in relation to cases where the deceased person died before 25 July 1986 but on or after 13 March 1975 (and the survivor dies on or after 9 October 2007) subject as follows.

(2)Where the deceased person died on or after 1 January 1985—

(a)the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes sections 32, 32A and 126 of CTTA 1984,

(b)the reference in that subsection to section 4 of IHTA 1984 is to section 4 of CTTA 1984,

(c)the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to that Act,

(d)the first reference in subsection (5) to the nil-rate band maximum is to that amount, and

(e)the reference in subsection (5) to Schedule 2 to IHTA 1984 includes Schedule 2 to CTTA 1984.

(3)Where the deceased person died on or after 7 April 1976 and before 1 January 1985—

(a)the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes sections 32, 32A and 126 of CTTA 1984, section 78 of FA 1976 and paragraph 2 of Schedule 9 to FA 1975,

(b)the reference in that subsection to section 4 of IHTA is to section 22 of FA 1975,

(c)the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to CTTA 1984 and the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975,

(d)the first reference in subsection (5) to the nil-rate band maximum is to that amount, and

(e)the reference in subsection (5) to Schedule 2 to IHTA 1984 includes Schedule 2 to CTTA 1984, Schedule 15 to FA 1980 and section 62 of FA 1978;

but, if the event occasioning the charge occurred before 27 October 1977, the reference in subsection (4) to the personal nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975 at the time of the deceased person’s death.

(4)Where the deceased person died on or after 13 March 1975 and before 7 April 1976—

(a)the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes paragraph 1 of Schedule 5 to that Act, section 126 of CTTA 1984 and paragraph 2 of Schedule 9 to FA 1975,

(b)the reference in that subsection to section 4 of IHTA is to section 22 of FA 1975,

(c)the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to CTTA 1984 and the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975, and

(d)the reference in subsection (4) to the personal nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975 at the time of the deceased person’s death.

Section 14

SCHEDULE 5Fuel duty: biodiesel and bioblend

1HODA 1979 is amended as follows.

2(1)Section 1 (hydrocarbon oil) is amended as follows.

(2)In subsection (1), for “Subsections (2) to (7) below” substitute “The following provisions”.

(3)After subsection (7) insert—

(8)“Kerosene” means heavy oil of which more than 50% by volume distils at a temperature of 240oC or less.

3(1)Section 2A (power to amend definitions) is amended as follows.

(2)In subsection (1), for paragraphs (a) to (e) substitute—

(a)biodiesel;

(b)bioethanol;

(c)unleaded petrol.

(3)Omit subsections (1A) and (1B).

4In section 6AA (excise duty on biodiesel), after subsection (3) insert—

(4)See section 14A (biodiesel used other than as fuel for road vehicles) for rebates on duty charged under this section.

5In section 6AB (excise duty on bioblend), for subsections (3) and (4) substitute—

(3)The rate per litre of duty under this section on any bioblend is the sum of—

(a)HO% of the rate per litre of duty under section 6 in the case of heavy oil, and

(b)BD% of the rate per litre of duty under section 6AA.

(4)In subsection (3)—

  • “HO%” means the percentage of the bioblend that is heavy oil, and

  • “BD%” means the percentage of the bioblend that is biodiesel,

where the percentages are by volume to the nearest 0.001%.

(4A)See section 14B (bioblend used other than as fuel for road vehicles) for rebates on duty charged under this section.

6In section 8 (excise duty on road fuel gas)—

(a)in subsection (2), for “in” substitute “for”, and

(b)omit subsection (6).

7In section 10 (restrictions on use of duty-free oil), omit subsection (8).

8In section 12 (rebate not allowed on fuel for road vehicles), omit subsection (3).

9In section 13 (penalties for misuse of rebated heavy oil), omit subsection (7).

10In section 13AA (restrictions on use of rebated kerosene), omit subsection (5).

11In section 13AB (penalties for misuse of kerosene), omit subsections (3) and (4).

12In section 14 (rebate on light oil for use as furnace fuel), omit subsection (9).

13After that section insert—

14ARebate on biodiesel used other than as fuel for road vehicles

(1)This section applies if, at the excise duty point, it is intended that biodiesel on which duty under section 6AA is charged will not be—

(a)used as fuel for a road vehicle, or

(b)used as an additive or extender in any substance so used.

(2)A rebate of duty is to be allowed on the biodiesel at a rate of £0.0969 a litre less than the rate of duty under section 6AA.

(3)In this section “the excise duty point” has the same meaning as in section 1 of the Finance (No.2) Act 1992.

14BRebate on bioblend used other than as fuel for road vehicles

(1)This section applies if, on the delivery for home use of bioblend on which duty under section 6AB is charged—

(a)it is intended that the bioblend will not be—

(i)used as fuel for a road vehicle, or

(ii)used as an additive or extender in any substance so used, and

(b)if the heavy oil used to produce the bioblend was kerosene, it is intended that the bioblend will not be—

(i)used as fuel for an engine within paragraph (a) or (b) of section 13AA(1), or

(ii)used as an additive or extender in any substance so used.

(2)A rebate of duty is to be allowed on the bioblend.

(3)The rate per litre of the rebate is the sum of—

(a)HO% of the relevant hydrocarbon rebate rate, and

(b)BD% of the relevant biodiesel rebate rate.

(4)“The relevant hydrocarbon rebate rate” is the rate specified in section 11(1) for the kind of heavy oil used to produce the bioblend.

(5)“The relevant biodiesel rebate rate” is—

(a)if the heavy oil used to produce the bioblend was kerosene, the rate of duty under section 6AA, and

(b)otherwise, the rate of the rebate under section 14A.

(6)Section 6AB(4) (meaning of “HO%” and “BD%”) applies for the purposes of subsection (3).

14CRestrictions on use of rebated biodiesel and bioblend

(1)Rebated biodiesel or bioblend must not be—

(a)used as fuel for a road vehicle,

(b)used as an additive or extender in any substance so used, or

(c)taken into a road vehicle as fuel or as an additive or extender in any substance used as fuel.

(2)Rebated bioblend that was produced by mixing kerosene and biodiesel must not be—

(a)used as fuel for an engine within paragraph (a) or (b) of section 13AA(1),

(b)used as an additive or extender in any substance so used, or

(c)taken into the fuel supply of such an engine.

(3)Subsections (1) and (2) do not apply to a quantity of biodiesel or bioblend if the amount specified in subsection (4) has been paid to the Commissioners, in accordance with regulations, in respect of it.

(4)The amount is—

Q × R

where—

  • Q is the quantity (in litres) of the biodiesel or bioblend, and

  • R is the rate of the rebate under section 14A or 14B at the time of payment.

(5)In subsection (3) “regulations” means regulations under section 24(1) made for the purposes of this section.

14DPenalties for misuse of rebated biodiesel or bioblend

(1)If biodiesel or bioblend is used or taken into a road vehicle in contravention of section 14C(1) or (2), the Commissioners may assess the amount specified in section 14C(4) as being excise duty due from any person who—

(a)used the biodiesel or bioblend, or

(b)was liable for it being taken into the vehicle,

and may notify the person or the person’s representative accordingly.

(2)Conduct within any of the following paragraphs attracts a penalty under section 9 of the Finance Act 1994 (civil penalties)—

(a)using biodiesel or bioblend in contravention of section 14C(1) or (2),

(b)becoming liable for biodiesel or bioblend being taken into a vehicle or the fuel supply of an engine in contravention of section 14C(1) or (2), and

(c)supplying biodiesel or bioblend, intending that it will be put to a particular use that is a prohibited use.

(3)A person commits an offence if—

(a)the person intentionally uses biodiesel or bioblend in contravention of section 14C(1) or (2),

(b)the person is liable for biodiesel or bioblend being taken into a vehicle or the fuel supply of an engine in contravention of section 14C(1) or (2), and knows that the taking in is in contravention of that provision, or

(c)the person supplies biodiesel or bioblend, intending that it will be put to a particular use that is a prohibited use.

(4)“Prohibited use” means a use that would contravene section 14C(1) or (2) if no payment under section 14C(3) were made in respect of the biodiesel or bioblend.

(5)A person guilty of an offence under this section is liable—

(a)on summary conviction, to—

(i)a fine not exceeding the statutory maximum or (if it is greater) 3 times the value of the biodiesel or bioblend in question, or

(ii)imprisonment for a term not exceeding 12 months,

or both, and

(b)on conviction on indictment, to a fine or imprisonment for a term not exceeding 7 years or both.

(6)Subsection (5)(a)(ii) has effect as if the reference there to 12 months were to 6 months—

(a)in this section as it extends to England and Wales, in relation to offences committed before the commencement of section 282 of the Criminal Justice Act 2003 (increase in maximum term that may be imposed on summary conviction of offence triable either way), and

(b)in this section as it extends to Northern Ireland.

14Omit section 17A (repayment of part of duty where biodiesel used otherwise than as road fuel).

15(1)Section 20A (mixing: adjustment of duty) is amended as follows.

(2)For subsections (1) to (4) substitute—

(1)Subsections (2) and (3) apply if—

(a)a relevant substance upon which duty under this Act has been charged is mixed in a pipe-line with another kind of relevant substance upon which such duty has been charged, and

(b)the mixing is approved mixing (see subsection (5)).

(2)If the Commissioners are of the opinion that—

(a)the amount of duty that would be charged on the mixture (if duty were charged at the time of mixing), is greater than

(b)the total amount of duty charged as mentioned in subsection (1)(a),

they may charge under this section a duty of excise on the mixture of an amount equal to the difference.

(3)If the Commissioners are of the opinion that the amount mentioned in subsection (2)(a) is less than the amount mentioned in subsection (2)(b), they may make under this section an allowance of an amount equal to the difference.

(4)Where a charge or allowance is made under this section, any relief or rebate which was permitted or allowed in respect of the charges mentioned in subsection (1)(a) is for the purposes of this Act to be disregarded.

(4A)In this section “relevant substance” means biodiesel, bioethanol, bioblend, bioethanol blend or hydrocarbon oil.

(4B)The cases that fall within subsection (1)(a) include cases where one kind of hydrocarbon oil is mixed with another kind of hydrocarbon oil.

(3)In subsection (5)(a), for the words from “in a” to “only)” substitute “relevant substances (or specified kinds of relevant substances) in a pipe-line”.

16(1)Section 20AAA (mixing of rebated oil) is amended as follows.

(2)Omit subsections (3) and (5).

(3)In subsection (9), for “, (2)(a) or (3)” substitute “or (2)(a)”.

17In section 20AA(1) (power to allow reliefs), after “12(2)” (in both places) insert “or 14C(3)”.

18Before section 21 (but after the heading “Administration and enforcement”) insert—

20ACDetermination by Commissioners of composition of substance

(1)The Commissioners may, for any prescribed purpose, determine in such way as they consider appropriate the proportion of any substance that is biodiesel or bioethanol.

(2)In subsection (1) “prescribed purpose” means a purpose, prescribed by regulations made by the Commissioners, that relates to any duty under this Act.

19In section 23 (prohibition on use etc of road fuel gas on which duty has not been paid), omit subsection (2).

20(1)Section 24 (control of duty-free and rebated oil) is amended as follows.

(2)In subsection (1), for the words from “section 11,” to “section 14(1),” substitute “any of sections 11 to 14C,”.

(3)In subsection (2)—

(a)for the words from the beginning to “above” substitute “The regulations”, and

(b)for the words from “subsection (2)” to the end substitute “section 12(2), 13AA(3) or 14C(3) are to be effective for the purposes of those provisions.”

(4)In subsection (3)—

(a)after “hydrocarbon oil” insert “, biodiesel or bioblend”, and

(b)in paragraph (b), for “or rebated light oil” substitute “, rebated light oil, rebated biodiesel or rebated bioblend”.

(5)In subsection (4A)(a), after “oil” insert “, biodiesel or bioblend”.

(6)In subsection (5), after “oil” insert “, biodiesel or bioblend”.

21In section 24A (penalties for misuse of marked oil), omit subsection (4).

22(1)Section 27 (interpretation) is amended as follows.

(2)In subsection (1)—

(a)in the definition of “controlled oil”, after “13AA” insert “or biodiesel or bioblend in respect of which a rebate has been allowed under section 14A or 14B”,

(b)after that definition insert—

“excepted vehicle” means a vehicle that is an excepted vehicle within the meaning of Schedule 1;,

(c)after the definition of “hydrocarbon oil” insert—

“kerosene” has the meaning given by section 1(8);,

(d)in the definition of “rebate”, after “14” insert “, 14A, 14B”, and

(e)in the definition of “road vehicle”, for the words from “vehicle which” to the end substitute “excepted vehicle;”.

(3)After that subsection insert—

(1ZA)For the purposes of this Act, a substance is used as fuel for a vehicle if (and only if) it is used as fuel for—

(a)the engine provided for propelling the vehicle, or

(b)an engine which draws fuel from the same supply as that engine.

(1ZB)For those purposes, a substance is taken into a vehicle as fuel, or as an additive or extender in any fuel, if (and only if) it is taken into the vehicle as part of the supply from which the engine provided for propelling the vehicle draws fuel.

(1ZC)For those purposes, the following persons are liable for a substance being taken into a vehicle or into the fuel supply of an engine—

(a)the person who has charge of the vehicle or engine at the time the substance is taken in, and

(b)the owner of the vehicle or engine at that time (or, if another person is entitled to possession of it at that time, that other person).

(1ZD)Subsection (1ZC) applies in relation to appliances and storage tanks as it applies in relation to vehicles.

23In Schedule 4 (regulations under section 24), omit—

(a)in paragraph 3, “17A,”, and

(b)in paragraph 22, the words from “and section 12(3)(a)” to the end.

24In Schedule 5 (sampling), in paragraph 3(1), omit “of oil”.

25In consequence of the amendments of HODA 1979, omit—

(a)section 1(2) of FA 1987,

(b)section 5(5) of FA 1996,

(c)in FA 1997—

(i)section 7(7), and

(ii)in Schedule 6, paragraph 6(5),

(d)in FA 2002—

(i)section 5(3), and

(ii)in Schedule 2, paragraph 4, and

(e)in FA 2004—

(i)section 7(3), and

(ii)section 10(2).

26The amendments made by this Schedule are treated as having come into force—

(a)so far as they confer a power to make regulations, on 19 March 2008, and

(b)for all other purposes, on 1 April 2008.

Section 16

SCHEDULE 6Aircraft and boat fuel, heating oil and fuel used for certain engines

Part 1Fuel used in aircraft and boats

Aviation gasoline

1HODA 1979 is amended as follows.

2In section 1 (hydrocarbon oil), after subsection (3C) insert—

(3D)“Aviation gasoline” means light oil which—

(a)is specially produced as fuel for aircraft,

(b)at 37.8oC, has a Reid Vapour Pressure of not less than 38kPa and not more than 49kPa, and

(c)is delivered for use solely as fuel for aircraft.

3In section 2A(1) (power to amend definitions), before paragraph (a) insert—

(za)aviation gasoline;.

4(1)Section 6 (hydrocarbon oil: rates of duty) is amended as follows.

(2)In subsection (1), for the words from the beginning to “below, there” substitute “There”.

(3)Omit subsections (3) and (4).

5In section 24(1) (control of use of duty-free and rebated oil), omit “section 6(3),”.

6In section 27(1) (interpretation), in the definition of “aviation gasoline”, for “section 6(4) above” substitute “section 1(3D)”.

7In Schedule 3 (regulations under section 21), omit paragraph 10A.

8In consequence of the amendments made by paragraphs 2 to 7, omit—

(a)in FA 1982, section 4(2), (3) and (7),

(b)in FA 1990, section 3(5), and

(c)in FA 1998, section 6(1)(a).

Kerosene used for aviation (avtur)

9HODA 1979 is amended as follows.

10In the heading of section 13AB, for “misuse of kerosene” substitute “contravention of section 13AA”.

11After that section insert—

13ACUse of rebated kerosene for private pleasure-flying

(1)This section applies in respect of kerosene upon which a rebate under section 11(1)(c) has been allowed.

(2)The kerosene must not be used as fuel for private pleasure-flying.

(3)If, on the supply of a quantity of the kerosene to a person, the person makes a relevant declaration to the supplier—

(a)subsection (2) does not apply in relation to that kerosene, and

(b)the person must pay, in accordance with regulations, the amount specified in subsection (4) to the Commissioners.

(4)The amount is—

Q × R

where—

  • Q is the quantity (in litres) of the kerosene, and

  • R is the rate of the rebate under section 11(1)(c) at the time of the declaration.

(5)The amount referred to in subsection (3)(b) is to be treated, for the purposes of section 12 of the Finance Act 1994 (assessments to excise duty), as an amount of excise duty.

(6)Regulations may provide, in cases where kerosene to which subsection (2) applies and other kerosene is taken into an aircraft as fuel, for the order in which the different kinds of kerosene are to be treated (for the purposes of this section and section 13AD) as used.

(7)In this section—

  • “private pleasure-flying” has the same meaning as in Article 14(1)(b) of Council Directive 2003/96/EC (taxation of energy products etc),

  • “regulations” means regulations under section 24(1) made for the purposes of this section, and

  • “relevant declaration”, in relation to a quantity of kerosene, means a declaration, made in the way and form specified by or under regulations, that the kerosene is to be used for private pleasure-flying.

13ADPenalties for contravention of section 13AC

(1)This section applies if a person—

(a)uses a quantity of kerosene in contravention of section 13AC(2), or

(b)fails to comply with section 13AC(3)(b).

(2)The Commissioners may assess the amount specified in section 13AC(4) as being excise duty due from the person, and may notify the person or the person’s representative accordingly.

(3)The use or failure attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

(4)For the purposes of that section, if this section applies by virtue of subsection (1)(b)—

(a)the amount referred to in section 13AC(3)(b) is to be treated as an amount of excise duty,

(b)the penalty for the failure is to be calculated by reference to that amount, and

(c)the failure also attracts daily penalties.

(5)If this section applies by virtue of subsection (1)(a), for the purpose of subsection (2) the reference in section 13AC(4) to the time of the declaration is to be read as the time of use.

Fuel for private pleasure craft

12HODA 1979 is amended as follows.

13(1)Section 14A (rebate on biodiesel used other than as fuel for road vehicles) is amended as follows.

(2)In subsection (1)—

(a)omit the “or” at the end of paragraph (a),

(b)after that paragraph insert—

(aa)used as fuel for propelling private pleasure craft, or, and

(c)in paragraph (b), for “so used” substitute “used as mentioned in paragraph (a) or (aa)”.

(3)After subsection (3) insert—

(4)In this section “private pleasure craft” has the same meaning as in section 14E.

(4)Accordingly, in the heading, insert at the end “etc”.

14(1)Section 14C (restrictions on use of rebated biodiesel and bioblend) is amended as follows.

(2)In subsection (1)—

(a)omit the “or” at the end of paragraph (b), and

(b)after paragraph (c) insert , or

(d)(in the case of rebated biodiesel) used as fuel for propelling private pleasure craft or as an additive or extender in any substance so used.

(3)After subsection (4) insert—

(4A)In subsection (1) “private pleasure craft” has the same meaning as in section 14E.

15After section 14D insert—

14ERebated heavy oil and bioblend: private pleasure craft

(1)This section applies in respect of rebated heavy oil or bioblend.

(2)The heavy oil or bioblend must not be used as fuel for propelling private pleasure craft.

(3)If, on the supply by a person (“the supplier”) of a quantity of the heavy oil or bioblend to another person, the other person makes a relevant declaration to the supplier—

(a)subsection (2) does not apply in relation to that heavy oil or bioblend, and

(b)the supplier must pay, in accordance with regulations, the amount specified in subsection (4) to the Commissioners.

(4)The amount is—

Q × R

where—

  • Q is the quantity (in litres) of the heavy oil or bioblend, and

  • R is the rate of the relevant rebate at the time of supply.

(5)The “relevant rebate” is—

(a)in the case of heavy oil upon which rebate was allowed under section 13ZA or 13AA(1), the rebate under that provision,

(b)in the case of heavy oil to which paragraph (a) does not apply, the rebate under section 11 for that kind of heavy oil, and

(c)in the case of bioblend, the rebate under section 11(1)(b).

(6)The amount referred to in subsection (3)(b) is to be treated, for the purposes of section 12 of the Finance Act 1994 (assessments to excise duty), as an amount of excise duty.

(7)Regulations may provide, in cases where heavy oil or bioblend to which subsection (2) applies and other heavy oil or bioblend is taken into a craft as fuel, for the order in which the different substances are to be treated (for the purposes of this section and section 14F) as used.

(8)In this section—

  • “private pleasure craft” has the same meaning as in Article 14(1)(c) of Council Directive 2003/96/EC (taxation of energy products etc),

  • “regulations” means regulations under section 24(1) made for the purposes of this section, and

  • “relevant declaration”, in relation to a quantity of heavy oil or bioblend, means a declaration, made in the way and form specified by or under regulations, that the heavy oil or bioblend is to be used as fuel for propelling private pleasure craft.

14FPenalties for contravention of section 14E

(1)This section applies if a person—

(a)uses a quantity of rebated heavy oil or bioblend in contravention of section 14E(2), or

(b)fails to comply with section 14E(3)(b).

(2)The Commissioners may assess the amount specified in section 14E(4) as being excise duty due from the person, and may notify the person or the person’s representative accordingly.

(3)The use or failure attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

(4)For the purposes of that section, if this section applies by virtue of subsection (1)(b)—

(a)the amount referred to in section 14E(3)(b) is to be treated as an amount of excise duty,

(b)the penalty for the failure is to be calculated by reference to that amount, and

(c)the failure also attracts daily penalties.

(5)If this section applies by virtue of subsection (1)(a), for the purpose of subsection (2) the reference in section 14E(4) to the time of supply is to be read as the time of use.

16In section 24(1) (control of use of duty-free and rebated oil), for “14C” substitute “14E”.

Consequential amendments

17FA 1994 is amended as follows.

18In section 12A(3)(c) (other assessment relating to excise duty matters)—

(a)after “13AB,” insert “13AD,”, and

(b)after “14,” insert “14F,”.

19In section 12B(2)(f) (section 12A: supplementary provisions)—

(a)after “13AB,” insert “13AD,”, and

(b)after “14” insert “, 14F”.

20In section 14(1)(ba) (requirement for review of a decision)—

(a)after “13AB,” insert “13AD,”, and

(b)after “14,” insert “14F,”.

Commencement etc

21The amendments made by this Part of this Schedule come into force on 1 November 2008.

22But section 13AC(2) of HODA 1979 does not apply to kerosene upon which a rebate under section 11(1)(c) of that Act was allowed before that date if it was supplied for use as fuel for an aircraft before that date.

23And section 14E(2) of that Act does not apply to heavy oil or bioblend upon which a rebate was allowed before that date if it was supplied for use as fuel for a craft before that date.

Part 2Heavy oil used for heating or as fuel for certain engines

Amendments of HODA 1979

24HODA 1979 is amended as follows.

25In section 11(1) (rebate on heavy oil), for “13, 13AA and 13AB below” substitute “12(1), 13ZA and 13AA(1)”.

26In section 12(2) (rebated heavy oil not to be used as fuel for road vehicles), after “above or” insert “section 13ZA or”.

27In the heading of section 13 (penalties for misuse of rebated heavy oil), for “misuse of rebated heavy oil” substitute “contravention of section 12”.

28After that section insert—

13ZARebate on certain heavy oil used for heating etc

(1)This section applies if, on the delivery of heavy oil (other than kerosene) upon which rebate at the rate mentioned in section 11(1)(c) would otherwise be allowed, it is intended to use the heavy oil—

(a)for heating, or

(b)as fuel for an engine.

(2)Rebate is to be allowed on the heavy oil at the rate mentioned in section 11(1)(a) (rather than at the rate mentioned in section 11(1)(c)).

(3)Nothing in this section applies in relation to heavy oil to which section 12(1) applies.

13ZBRestrictions on supply of certain heavy oil for heating etc

(1)If a person supplies relevant heavy oil, having reason to believe that it will be put to a particular use that is a prohibited use—

(a)the Commissioners may assess the amount specified in subsection (3) as being excise duty due from the person (and may notify the person or the person’s representative accordingly), and

(b)the supply of the heavy oil is conduct that attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

(2)Subsection (1) does not apply in relation to a quantity of relevant heavy oil if (before the time of supply) the amount specified in subsection (3) has been paid to the Commissioners, in accordance with regulations, in respect of it.

(3)The amount is—

Q × RRFO

where—

  • Q is the quantity (in litres) of the relevant heavy oil, and

  • RRFO is the rate for rebated fuel oil at the time of payment.

(4)For the purposes of subsection (3) the rate for rebated fuel oil at any time is—

(a)the rate of duty under section 6(1A)(c) at that time, minus

(b)the rate of rebate allowable under section 11(1)(a) at that time.

(5)In this section—

  • “prohibited use” means—

    (a)

    use for heating, or

    (b)

    use as fuel for an engine (except where such use would amount to use as fuel for a road vehicle),

  • “regulations” means regulations under section 24(1) made for the purposes of this section, and

  • “relevant heavy oil” means heavy oil, other than kerosene, upon which rebate at the rate mentioned in section 11(1)(c) has been allowed.

(6)Nothing in this section applies to a person who supplies relevant heavy oil for re-processing.

29In section 20AAA(6)(b) (mixing of rebated oil), before “13AA” insert “13ZA or”.

30In section 20AA(1) (power to allow reliefs), after “12(2)” (in both places) insert “, 13ZB(2)”.

31In section 24(2) (control of use of duty-free and rebated oil), after “12(2),” insert “13ZB(2),”.

32In section 27(1) (interpretation), in the definition of “rebate”, after “11,” insert “13ZA,”.

Amendments of FA 1994

33FA 1994 is amended as follows.

34In section 12A(3)(c) (other assessment relating to excise duty matters), after “13,” insert “13ZB,”.

35In section 12B(2)(f) (section 12A: supplementary provisions), after “13,” insert “13ZB,”.

36In section 14(1)(ba) (requirement for review of a decision), after “13,” insert “13ZB,”.

Commencement

37The amendments made by this Part of this Schedule come into force on 1 November 2008.

Section 25

SCHEDULE 7Remittance basis

Part 1Main provisions

Remittance basis_general

1In Part 14 of ITA 2007 (income tax liability: miscellaneous rules), before Chapter 1 insert—

Chapter A1Remittance basis
Introduction
809AOverview of Chapter

This Chapter provides for an alternative basis of charge in the case of individuals who are not domiciled in the United Kingdom or are not ordinarily UK resident.

Application of remittance basis
809BClaim for remittance basis to apply

(1)This section applies to an individual for a tax year if the individual—

(a)is UK resident in that year,

(b)is not domiciled in the United Kingdom in that year or is not ordinarily UK resident in that year, and

(c)makes a claim under this section for that year.

(2)The claim must contain one or both of the following statements—

(a)that the individual is not domiciled in the United Kingdom in that year;

(b)that the individual is not ordinarily UK resident in that year.

(3)Sections 42 and 43 of TMA 1970 (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to a claim under this section as they apply in relation to a claim for relief.

809CClaim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply

(1)This section applies to an individual for a tax year if the individual—

(a)is aged 18 or over in that year, and

(b)has been UK resident in at least 7 of the 9 tax years immediately preceding that year.

(2)A claim under section 809B by the individual for that year must contain a nomination of the income or chargeable gains of the individual for that year to which section 809H(2) is to apply.

(3)The income or chargeable gains nominated must be part (or all) of the individual’s foreign income and gains for that year.

(4)The income and chargeable gains nominated must be such that the relevant tax increase does not exceed £30,000.

(5)“The relevant tax increase” is—

(a)the total amount of income tax and capital gains tax payable by the individual for that year, minus

(b)the total amount of income tax and capital gains tax that would be payable by the individual for that year apart from section 809H(2).

(6)See section 809Z7 for the meaning of an individual’s foreign income and gains for a tax year.

809DApplication of remittance basis without claim where unremitted foreign income and gains under £2,000

(1)This section applies to an individual for a tax year if—

(a)the individual is UK resident in that year,

(b)the individual is not domiciled in the United Kingdom in that year or is not ordinarily UK resident in that year, and

(c)the amount of the individual’s unremitted foreign income and gains for that year is less than £2,000.

(2)The amount of an individual’s “unremitted” foreign income and gains for a tax year is—

(a)the total amount of what would (if this section applied) be the individual’s foreign income and gains for that year, minus

(b)the total amount of those income and gains that are remitted to the United Kingdom in that year.

809EApplication of remittance basis without claim: other cases

(1)This section applies to an individual for a tax year if—

(a)the individual is UK resident in that year,

(b)the individual is not domiciled in the United Kingdom in that year or is not ordinarily UK resident in that year,

(c)the individual has no UK income or gains for that year,

(d)no relevant income or gains are remitted to the United Kingdom in that year, and

(e)either—

(i)the individual has been UK resident in not more than 6 of the 9 tax years immediately preceding that year, or

(ii)the individual is under 18 throughout that year.

(2)For the purposes of subsection (1)(c) the individual’s UK income and gains for the tax year are the individual’s income and chargeable gains for that year other than what would (if this section applied) be the individual’s foreign income and gains for that year.

(3)For the purposes of subsection (1)(d) relevant income and gains are—

(a)what would (if this section applied) be the individual’s foreign income and gains for the tax year mentioned in subsection (1), and

(b)the individual’s foreign income and gains for every other tax year for which section 809B or 809D or this section applies to the individual.

Effect of section 809B, 809D or 809E applying
809FEffect on what is chargeable

(1)This section applies if section 809B, 809D or 809E applies to an individual for a tax year.

(2)The individual’s relevant foreign earnings for that year are charged in accordance with section 22 or 26 of ITEPA 2003.

(3)The individual’s relevant foreign income for that year is charged in accordance with section 832 of ITTOIA 2005.

(4)If the individual is not domiciled in the United Kingdom in that year, the individual’s foreign chargeable gains for that year are charged in accordance with section 12 of TCGA 1992.

(5)For the effect on amounts which count as employment income of the individual under certain provisions of Part 7 of ITEPA 2003 (employment-related securities), see Chapter 5A of Part 2 of that Act.

(6)Nothing in this section applies in relation to nominated income or chargeable gains (see section 809H).

809GClaim for remittance basis: effect on allowances etc

(1)This section applies if section 809B (claim for remittance basis to apply) applies to an individual for a tax year.

(2)For that year, the individual is not entitled to—

(a)any allowance under Chapter 2 of Part 3 (personal allowance and blind person’s allowance),

(b)any tax reduction under Chapter 3 of that Part (tax reductions for married couples and civil partners), or

(c)any relief under section 457, 458 or 459 (payments for life insurance etc).

(3)See also section 3(1A) of TCGA 1992 (no annual exempt amount for chargeable gains).

809HClaim for remittance basis by long-term UK resident: charge

(1)This section applies if—

(a)section 809B (claim for remittance basis to apply) applies to an individual for a tax year (“the relevant tax year”),

(b)the individual is aged 18 or over in the relevant tax year, and

(c)the individual has been UK resident in at least 7 of the 9 tax years immediately preceding the relevant tax year.

(2)Income tax is charged on nominated income, and capital gains tax is charged on nominated chargeable gains, as if section 809B did not apply to the individual for the relevant tax year (and neither did section 809D).

(3)“Nominated” income or chargeable gains means income or chargeable gains nominated under section 809C in the individual’s claim under section 809B for the relevant tax year.

(4)If the relevant tax increase would otherwise be less than £30,000, subsection (2) has effect as if—

(a)in addition to the income and gains actually nominated under section 809C in the individual’s claim under section 809B for the relevant tax year, an amount of income had been nominated so as to make the relevant tax increase equal to £30,000, and

(b)the individual’s income for that year were such that such a nomination could have been made (if that is not the case).

(5)“The relevant tax increase” is—

(a)the total amount of income tax and capital gains tax payable by the individual for the relevant tax year, minus

(b)the total amount of income tax and capital gains tax that would be payable by the individual for the relevant tax year apart from subsection (2).

(6)Nothing in subsection (4) affects what is regarded, for the purposes of section 809I or 809J, as nominated under section 809C.

809IRemittance basis charge: income and gains treated as remitted

(1)This section applies if—

(a)any of an individual’s nominated income and gains is remitted to the United Kingdom in a tax year, and

(b)any of the individual’s remittance basis income and gains has not been remitted to the United Kingdom in or before that year.

(2)Income tax and capital gains tax are charged, for that year and subsequent tax years, as if the income and chargeable gains treated under section 809J as remitted to the United Kingdom by the individual in that tax year had been so remitted (and income and chargeable gains of the individual that were actually remitted in that year had not been).

(3)An individual’s “nominated income and gains” are the total income and chargeable gains nominated by the individual under section 809C for the tax year mentioned in subsection (1)(a) or any earlier tax year.

(4)An individual’s “remittance basis income and gains” are the foreign income and gains of the individual for all the tax years (up to and including the tax year mentioned in subsection (1)(a)) for which section 809B, 809D or 809E applies to the individual, apart from the individual’s nominated income and gains.

809JSection 809I: order of remittances

(1)If section 809I applies, the following steps are to be taken for the purpose of determining the income or gains treated in a tax year (“the relevant tax year”) as remitted to the United Kingdom by the individual.

  • Step 1

    Find the total amount of—

    (a)

    the individual’s nominated income and gains, and

    (b)

    the individual’s remittance basis income and gains,

    that have been remitted to the United Kingdom in the relevant tax year.

    This amount is “the relevant amount”.

  • Step 2

    Find the amount of foreign income and gains of the individual for the relevant tax year (other than income or chargeable gains nominated under section 809C) that is within each of the categories of income and gains in paragraphs (a) to (h) of subsection (2).

    If none of sections 809B, 809D and 809E apply to the individual for that year, treat those amounts as nil (and accordingly go to step 6).

  • Step 3

    Find the earliest paragraph for which the amount determined under step 2 is not nil.

    If that amount does not exceed the relevant amount, treat the individual as having remitted the income or gains within that paragraph (and for that tax year).

    Otherwise, treat the individual as having remitted the relevant proportion of each kind of income or gains within that paragraph (and for that tax year).

    “The relevant proportion” is the relevant amount divided by the amount determined under step 2 for that paragraph.

  • Step 4

    Reduce the relevant amount by the amount taken into account under step 3.

  • Step 5

    If the relevant amount (as reduced under step 4) is not nil, start again at step 3.

    In step 3, read the reference to the earliest paragraph of the kind mentioned there as a reference to the earliest such paragraph which has not previously been taken into account under that step.

  • Step 6

    If the relevant amount (as reduced) is not nil once steps 3 to 5 have been undertaken in relation to all paragraphs of subsection (2) for which the amount determined under step 2 is not nil, start again at step 2.

    In step 2, read the reference to the foreign income and gains of the individual for the relevant tax year as a reference to such of the foreign income and gains of the individual for the appropriate tax year as had not been remitted by the beginning of the relevant tax year.

    “The appropriate tax year” is the latest tax year which is—

    (a)

    before the last tax year for which step 2 has been undertaken, and

    (b)

    a tax year for which section 809B, 809D or 809E applies to the individual.

(2)The kinds of income and gains are—

(a)relevant foreign earnings (other than those subject to a foreign tax),

(b)foreign specific employment income (other than income subject to a foreign tax),

(c)relevant foreign income (other than income subject to a foreign tax),

(d)foreign chargeable gains (other than gains subject to a foreign tax),

(e)relevant foreign earnings subject to a foreign tax,

(f)foreign specific employment income subject to a foreign tax,

(g)relevant foreign income subject to a foreign tax, and

(h)foreign chargeable gains subject to a foreign tax.

(3)In this section the individual’s “nominated income and gains” are the total income and chargeable gains nominated by the individual under section 809C for the relevant tax year or any earlier tax year.

(4)In step 1 of subsection (1) the individual’s “remittance basis income and gains” are the foreign income and gains of the individual for all the tax years (up to and including the relevant tax year) for which section 809B, 809D or 809E applies to the individual, apart from the individual’s nominated income and gains.

(5)In step 6 of subsection (1) the reference to income or gains being remitted is—

(a)as respects any tax year before section 809I applies, to income or gains being remitted to the United Kingdom, and

(b)as respects any tax year in relation to which that section applies, to income or gains treated under this section as so remitted.

(6)In subsection (2) “foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

Remittance of income and gains: introduction
809KSections 809L to 809Z6: introduction

(1)Sections 809L to 809Z6 apply for the purposes of—

(a)this Chapter,

(b)sections 22 and 26 of ITEPA 2003 (relevant foreign earnings charged on remittance basis),

(c)section 41A of that Act (specific employment income from securities etc charged on remittance basis),

(d)section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis), and

(e)section 12 of TCGA 1992 (foreign chargeable gains charged on remittance basis).

(2)Those sections—

(a)explain what is meant by income or chargeable gains being “remitted to the United Kingdom” (sections 809L to 809O),

(b)provide for the calculation of the amount remitted (section 809P),

(c)contain rules for attributing transfers from mixed funds to particular kinds of income and capital (sections 809Q to 809S),

(d)contain supplementary provision for certain cases (sections 809T and 809U), and

(e)treat income or chargeable gains as not remitted to the United Kingdom in certain cases (sections 809V to 809Z6).

Remittance of income and gains: meaning of “remitted to the United Kingdom”
809LMeaning of “remitted to the United Kingdom”

(1)An individual’s income is, or chargeable gains are, “remitted to the United Kingdom” if—

(a)conditions A and B are met,

(b)condition C is met, or

(c)condition D is met.

(2)Condition A is that—

(a)money or other property is brought to, or received or used in, the United Kingdom by or for the benefit of a relevant person, or

(b)a service is provided in the United Kingdom to or for the benefit of a relevant person.

(3)Condition B is that—

(a)the property, service or consideration for the service is (wholly or in part) the income or chargeable gains,

(b)the property, service or consideration—

(i)derives (wholly or in part, and directly or indirectly) from the income or chargeable gains, and

(ii)in the case of property or consideration, is property of or consideration given by a relevant person,

(c)the income or chargeable gains are used outside the United Kingdom (directly or indirectly) in respect of a relevant debt, or

(d)anything deriving (wholly or in part, and directly or indirectly) from the income or chargeable gains is used as mentioned in paragraph (c).

(4)Condition C is that qualifying property of a gift recipient—

(a)is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person,

(b)is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or

(c)is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt.

(5)Condition D is that property of a person other than a relevant person (apart from qualifying property of a gift recipient)—

(a)is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person,

(b)is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or

(c)is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt,

in circumstances where there is a connected operation.

(6)In a case where subsection (4)(a) or (b) or (5)(a) or (b) applies to the importation or use of property, the income or chargeable gains are taken to be remitted at the time the property or service is first enjoyed by a relevant person by virtue of that importation or use.

(7)In this section “relevant debt” means a debt that relates (wholly or in part, and directly or indirectly) to—

(a)property falling within subsection (2)(a),

(b)a service falling within subsection (2)(b),

(c)qualifying property dealt with as mentioned in subsection (4)(a),

(d)a service falling within subsection (4)(b),

(e)qualifying property dealt with as mentioned in subsection (5)(a), or

(f)a service falling within subsection (5)(b).

(8)For the purposes of this section, the reference to a debt that relates to property or a service includes a debt for interest on money lent, where the lending relates to the property or service.

(9)The cases in which income or chargeable gains are used in respect of a debt include cases where income or chargeable gains are used to pay interest on the debt.

(10)This section is subject to sections 809V to 809Z6 (property treated as not remitted to the United Kingdom).

809MMeaning of “relevant person”

(1)This section applies for the purposes of sections 809L, 809N and 809O.

(2)A “relevant person” is—

(a)the individual,

(b)the individual’s husband or wife,

(c)the individual’s civil partner,

(d)a child or grandchild of a person falling within any of paragraphs (a) to (c), if the child or grandchild has not reached the age of 18,

(e)a close company in which a person falling within any other paragraph of this subsection is a participator,

(f)a company in which a person falling within any other paragraph of this subsection is a participator, and which would be a close company if it were resident in the United Kingdom,

(g)the trustees of a settlement of which a person falling within any other paragraph of this subsection is a beneficiary, or

(h)a body connected with such a settlement.

(3)For that purpose—

(a)a man and woman living together as husband and wife are treated as if they were husband and wife,

(b)two people of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other,

(c)“close company” has the same meaning as in the Corporation Tax Acts (see sections 414 and 415 of ICTA),

(d)“settlement” and “settlor” have the same meaning as in Chapter 2 of Part 9,

(e)“beneficiary”, in relation to a settlement, means any person who receives, or may receive, any benefit under or by virtue of the settlement,

(f)“trustee” has the same meaning as in section 993 (see, in particular, section 994(3)), and

(g)a body is “connected with” a settlement if the body falls within section 993(3)(c), (d), (e) or (f) as regards the settlement.

809NSection 809L: gift recipients, qualifying property and enjoyment

(1)This section applies for the purposes of determining whether or not income or chargeable gains of an individual are remitted to the United Kingdom by virtue of condition C in section 809L.

(2)A “gift recipient” means a person, other than a relevant person, to whom the individual makes a gift of money or other property that—

(a)is income or chargeable gains of the individual, or

(b)derives (wholly or in part, and directly or indirectly) from income or chargeable gains of the individual.

(3)The question of whether or not a person is a relevant person is to be determined by reference to the time when a gift is made.

(4)But, if a person to whom a gift is made subsequently becomes a relevant person, the person ceases to be a gift recipient.

(5)The individual “makes a gift of” property if the individual disposes of the property—

(a)for no consideration, or

(b)for consideration less than the full consideration in money or money’s worth that would be given if the disposal were by way of a bargain made at arm’s length;

but, in a case falling in paragraph (b), the individual is to be taken to make a gift of only so much of the property as exceeds the consideration actually given.

(6)A reference to the individual making a gift of property includes a case where—

(a)the individual retains an interest in the property, or

(b)an interest, right or arrangement enables or entitles the individual to benefit from the property.

(7)“Qualifying property”, in relation to a gift recipient, is—

(a)the property that the individual gave to the gift recipient,

(b)anything that derives (wholly or in part, and directly or indirectly) from that property, or

(c)any other property, but only if it is dealt with as mentioned in section 809L(4)(a), (b) or (c) by virtue of an operation which is effected—

(i)with reference to the gift of the property to the gift recipient, or

(ii)with a view to enabling or facilitating the gift of the property to the gift recipient to be made.

(8)In subsection (7)—

(a)the reference in paragraph (b) to anything deriving from property, and

(b)the reference in paragraph (c) to other property,

includes a thing, or property, that does not belong to the individual but which the individual is enabled or entitled to benefit from by virtue of any interest, right or arrangement.

(9)Enjoyment by a relevant person of property or a service is to be disregarded in any of these cases—

(a)if the property or service is enjoyed virtually to the entire exclusion of all relevant persons,

(b)if full consideration in money or money’s worth is given by a relevant person for the enjoyment, or

(c)if the property or service is enjoyed by relevant persons in the same way, and on the same terms, as it may be enjoyed by the general public or by a section of the general public.

809OSection 809L: dealings where there is a connected operation

(1)This section applies for the purposes of determining whether or not income or chargeable gains of an individual are remitted to the United Kingdom by virtue of condition D in section 809L.

(2)For the purposes of section 809L(5), the question of whether or not the person whose property is dealt with as mentioned in paragraph (a), (b) or (c) of section 809L(5) is a relevant person is to be determined by reference to the time when the property is so dealt with.

(3)A “connected operation”, in relation to property dealt with as mentioned in section 809L(5)(a), (b) or (c), means an operation which is effected—

(a)with reference to a qualifying disposition, or

(b)with a view to enabling or facilitating a qualifying disposition.

(4)A “qualifying disposition” is a disposition that—

(a)is made by a relevant person,

(b)is made to, or for the benefit of, the person whose property is dealt with as mentioned in section 809L(5)(a), (b) or (c), and

(c)is a disposition of money or other property that is, or derives (wholly or in part, and directly or indirectly) from, income or chargeable gains of the individual.

(5)But a disposition of property is not a qualifying disposition if the disposition is, or is part of, the giving of full consideration in money or money’s worth for the dealing that falls within section 809L(5)(a), (b) or (c).

(6)Enjoyment by a relevant person of property or a service is to be disregarded in any of these cases—

(a)if the property or service is enjoyed virtually to the entire exclusion of all relevant persons,

(b)if full consideration in money or money’s worth is given by a relevant person for the enjoyment, or

(c)if the property or service is enjoyed by relevant persons in the same way, and on the same terms, as it may be enjoyed by the general public or by a section of the general public.

Remittance of income and gains: amount remitted
809PSection 809L: amount remitted

(1)The amount of income or chargeable gains remitted to the United Kingdom is to be determined as follows.

(2)If the property, service or consideration is the income or chargeable gains, the amount remitted is equal to the amount of the income or chargeable gains.

(3)If the property, service or consideration derives from the income or chargeable gains, the amount remitted is equal to the amount of income or chargeable gains from which the property, service or consideration derives.

(4)If the income or chargeable gains are used as mentioned in section 809L(3)(c), the amount remitted is equal to the amount of income or chargeable gains used; but this is subject to subsection (10).

(5)If anything deriving from the income or chargeable gains is used as mentioned in section 809L(3)(c), the amount remitted is equal to the amount of income or chargeable gains from which what is used derives; but this is subject to subsection (10).

(6)In a case falling within section 809L(4)(a) or (b), the amount remitted is equal to the amount of the relevant income or chargeable gains.

(7)In a case falling within section 809L(4)(c), the amount remitted is equal to the amount of the relevant income or chargeable gains; but this is subject to subsection (10).

(8)In a case falling within section 809L(5)(a) or (b), the amount remitted is equal to the amount of the income or chargeable gains referred to in section 809O(4)(c).

(9)In a case falling within section 809L(5)(c), the amount remitted is equal to the amount of the income or chargeable gains referred to in section 809O(4)(c); but this is subject to subsection (10).

(10)If the debt is only partly in respect of the property or service, the amount remitted is (if it would otherwise be greater) limited to the amount the debt would be if it were wholly in respect of the property or service.

(11)In subsections (6) and (7) “relevant income or chargeable gains” means—

(a)if the qualifying property falls within section 809N(7)(a), the income or gains—

(i)of which the qualifying property consists, or

(ii)from which the qualifying property derives;

(b)if the qualifying property falls within section 809N(7)(b), the income or gains—

(i)of which the property given to the gift recipient consisted, or

(ii)from which that property derived;

(c)if the qualifying property falls within section 809N(7)(c), the income or gains—

(i)of which the property given to the gift recipient consists, or

(ii)from which that property derives.

(12)If the amount remitted (taken together with any amount previously remitted) would otherwise exceed the amount of the income or chargeable gains, the amount remitted is limited to the amount which (when taken together with any amount previously remitted) is equal to the amount of the income or chargeable gains.

Remittance of income and gains: transfers from mixed funds
809QSections 809L and 809P: transfers from mixed funds

(1)This section applies for the purposes mentioned in subsection (2) where condition A in section 809L is met and—

(a)the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, a transfer from a mixed fund, or

(b)a transfer from a mixed fund, or anything deriving (wholly or in part, and directly or indirectly) from such a transfer, is used as mentioned in section 809L(3)(c).

(2)The purposes referred to in subsection (1) are—

(a)determining whether condition B in section 809L is met, and

(b)if it is met, determining (under section 809P) the amount of income or chargeable gains remitted.

(3)The extent to which the transfer is of the individual’s income or chargeable gains is to be determined as follows.

  • Step 1

    For each of the categories of income and capital in paragraphs (a) to (i) of subsection (4), find (applying section 809R) the amount of income or capital of the individual for the relevant tax year in the mixed fund immediately before the transfer.

    “The relevant tax year” is the tax year in which the transfer occurs.

  • Step 2

    Find the earliest paragraph for which the amount determined under step 1 is not nil.

    If that amount does not exceed the amount of the transfer, treat the transfer as containing the income or capital within that paragraph (and for that tax year).

    Otherwise, treat the transfer as containing the relevant proportion of each kind of income or capital within that paragraph (and for that tax year).

    “The relevant proportion” is the amount of the transfer divided by the amount determined under step 1 for that paragraph.

  • Step 3

    Treat the amount of the transfer as reduced by the amount taken into account under step 2.

  • Step 4

    If the amount of the transfer (as reduced under step 3) is not nil, start again at step 2.

    In step 2, read the reference to the earliest paragraph of the kind mentioned there as a reference to the earliest such paragraph which has not previously been taken into account under that step in relation to the transfer.

  • Step 5

    If the amount of the transfer (as reduced under step 3) is not nil once steps 2 and 3 have been undertaken in relation to all paragraphs of subsection (4) for which the amount determined under step 1 is not nil, start again at step 1.

    In step 1, read the reference to the relevant tax year as a reference to the tax year immediately before the last tax year for which step 1 has been undertaken in relation to the transfer.

(4)The kinds of income and capital are—

(a)employment income (other than income within paragraph (b), (c) or (f)),

(b)relevant foreign earnings (other than income within paragraph (f)),

(c)foreign specific employment income (other than income within paragraph (f)),

(d)relevant foreign income (other than income within paragraph (g)),

(e)foreign chargeable gains (other than chargeable gains within paragraph (h)),

(f)employment income subject to a foreign tax,

(g)relevant foreign income subject to a foreign tax,

(h)foreign chargeable gains subject to a foreign tax, and

(i)income or capital not within another paragraph of this subsection.

(5)In subsection (4) “foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

(6)In this section “mixed fund” means money or other property which, immediately before the transfer, contains or derives from—

(a)more than one of the kinds of income and capital mentioned in subsection (4), or

(b)income or capital for more than one tax year.

(7)References in this section to the amount of the transfer include the market value of it.

(8)References in this section and section 809R to anything deriving from income or capital within paragraph (i) of subsection (4) do not include—

(a)income or gains within any of paragraphs (a) to (h) of that subsection, or

(b)anything deriving from such income or gains.

809RSection 809Q: composition of mixed fund

(1)This section applies for the purposes of step 1 of section 809Q(3) (composition of mixed fund).

(2)Treat property which derives wholly or in part (and directly or indirectly) from an individual’s income or capital for a tax year as consisting of or containing that income or capital.

(3)If a debt relating (wholly or in part, and directly or indirectly) to property is at any time satisfied (wholly or in part) by—

(a)an individual’s income or capital for a tax year, or

(b)anything deriving (directly or indirectly) from such income or capital,

from that time treat the property as consisting of or containing the income or capital if and to the extent that it is just and reasonable to do so.

(4)Treat an offshore transfer from a mixed fund as containing the appropriate proportion of each kind of income or capital in the fund immediately before the transfer.

“The appropriate proportion” means the amount (or market value) of the transfer divided by the market value of the mixed fund immediately before the transfer.

(5)A transfer from a mixed fund is an “offshore transfer” for the purposes of subsection (4) if and to the extent that section 809Q does not apply in relation to it.

(6)Treat a transfer from a mixed fund as an “offshore transfer” (and section 809Q as not applying in relation to it, if it otherwise would do) if and to the extent that, at the end of a tax year in which it is made—

(a)section 809Q does not apply in relation to it, and

(b)on the basis of the best estimate that can reasonably be made at that time, section 809Q will not apply in relation to it.

(7)In this section ‘mixed fund’ means money or other property containing or deriving from—

(a)more than one of the kinds of income and capital mentioned in section 809Q(4), or

(b)income or capital for more than one tax year.

(8)If section 809Q applies in relation to part of a transfer, apply that section in relation to that part before applying subsection (4) in relation to the rest of the transfer.

(9)If section 809Q applies in relation to more than one transfer from a mixed fund, when undertaking step 1 in relation to the second or any subsequent transfer take into account the effect of step 2 of section 809Q(3) (composition of transfer) as it applied in relation to each earlier transfer.

809SSection 809Q: anti-avoidance

(1)This section applies if, by reason of an arrangement the main purpose (or one of the main purposes) of which is to secure an income tax advantage or capital gains tax advantage, a mixed fund would otherwise be regarded as containing income or capital within any of paragraphs (f) to (i) of section 809Q(4).

(2)Treat the mixed fund as containing so much (if any) of the income or capital as is just and reasonable.

(3)“Arrangement” includes any scheme, understanding, transaction or series or transactions (whether or not enforceable).

(4)“Income tax advantage” has the meaning given by section 683.

(5)“Capital gains tax advantage” means—

(a)a relief from capital gains tax or increased relief from capital gains tax,

(b)a repayment of capital gains tax or increased repayment of capital gains tax,

(c)the avoidance or reduction of a charge to capital gains tax or an assessment to capital gains tax, or

(d)the avoidance of a possible assessment to capital gains tax.

Remittance of income and gains: supplementary
809TForeign chargeable gains accruing on disposal made other than for full consideration

(1)This section applies if—

(a)foreign chargeable gains accrue to an individual on the disposal of an asset, and

(b)the individual does not receive consideration for the disposal of an amount equal to the market value of the asset.

(2)For the purposes of this Chapter treat the asset as deriving from the chargeable gains.

809UDeemed income or gains not to be regarded as remitted before time when they are treated as arising or accruing

Where—

(a)income or foreign chargeable gains are treated as arising or accruing, and

(b)by virtue of anything done in relation to anything regarded as deriving from the income or chargeable gains, the income or chargeable gains would otherwise be regarded as remitted to the United Kingdom before the time when they are treated as arising or accruing,

treat the income or chargeable gains as remitted to the United Kingdom at that time.

Remittance of income and gains: property treated as not remitted
809VMoney paid to the Commissioners

(1)Money that is brought to the United Kingdom by way of one or more direct payments to the Commissioners is to be treated as not remitted to the United Kingdom—

(a)if the payments are made in relation to a tax year to which section 809H applies, and

(b)if, or to the extent that, the payments do not exceed £30,000.

(2)Subsection (1) does not apply to a payment if, or to the extent that, it is repaid by the Commissioners.

809WConsideration for certain services

(1)This section applies to income or chargeable gains if—

(a)the income or gains would (but for subsection (2)) be regarded as remitted to the United Kingdom because conditions A and B in section 809L are met,

(b)condition A in section 809L is met because a service is provided in the United Kingdom (“the relevant UK service”), and

(c)condition B in section 809L is met because section 809L(3)(a) or (b) applies to the consideration for the relevant UK service (“the relevant consideration”).

(2)The income or chargeable gains are to be treated as not remitted to the United Kingdom if the following conditions are met; but this is subject to subsection (5).

(3)Condition A is that the relevant UK service relates wholly or mainly to property situated outside the United Kingdom.

(4)Condition B is that the whole of the relevant consideration is given by way of one or more payments to one or more bank accounts held outside the United Kingdom by or on behalf of the person who provides the relevant UK service.

(5)Subsection (2) does not apply if the relevant UK service relates (to any extent) to the provision in the United Kingdom of—

(a)a benefit that is treated as deriving from the income by virtue of section 735, or

(b)a relevant benefit within the meaning of section 87B of TCGA 1992 that is treated as deriving from the chargeable gains by virtue of that section.

(6)Sections 275 to 275C of TCGA 1992 (location of assets) apply for the purposes of subsection (3) as they apply for the purposes of TCGA 1992.

809XExempt property

(1)Exempt property which is brought to, or received or used in, the United Kingdom in circumstances in which section 809L(2)(a) applies is to be treated as not remitted to the United Kingdom.

(2)Subsections (3) to (5) set out the cases in which property is exempt property.

(3)Property is exempt property if it meets the public access rule (see sections 809Z and 809Z1).

(4)Clothing, footwear, jewellery and watches that derive from relevant foreign income are exempt property if they meet the personal use rule (see section 809Z2).

(5)Property of any description that derives from relevant foreign income is exempt property if—

(a)the property meets the repair rule (see section 809Z3),

(b)the property meets the temporary importation rule (see section 809Z4), or

(c)the notional remitted amount (see section 809Z5) is less than £1,000.

809YProperty that ceases to be exempt property treated as remitted

(1)Property that ceases to be exempt property is to be treated as having been remitted to the United Kingdom at the time it ceases to be exempt property.

(2)Property ceases to be exempt property in either of the following cases.

(3)The first case is where the whole or part of the exempt property is sold, or otherwise converted into money, whilst it is in the United Kingdom.

(4)The second case is where the property—

(a)is exempt property only because it meets one or more of the relevant rules,

(b)ceases to meet that rule, or all of those rules, whilst it is in the United Kingdom, and

(c)does not meet any other relevant rule.

(5)In this section—

  • “money” includes—

    (a)

    a traveller’s cheque,

    (b)

    a promissory note,

    (c)

    a bill of exchange, and

    (d)

    any other—

    (i)

    instrument that is evidence of a debt, or

    (ii)

    voucher, stamp or similar token or document which is capable of being exchanged for money, goods or services, and

  • “relevant rule” means—

    (a)

    the public access rule,

    (b)

    the personal use rule,

    (c)

    the repair rule, and

    (d)

    the temporary importation rule.

809ZPublic access rule: general

(1)Property meets the public access rule if conditions A to D are met.

(2)Condition A is that the property is—

(a)a work of art,

(b)a collectors' item, or

(c)an antique,

within the meaning of Council Directive 2006/112/EC (see, in particular, Annex IX to that Directive).

(3)Condition B is that—

(a)the property is available for public access at an approved establishment,

(b)the property is to be available for public access at an approved establishment and, in connection with its being so available, is in transit to, or in storage at, public access rule premises, or

(c)the property has been available for public access at an approved establishment and, in connection with its having been so available, is in transit from, or in storage at, public access rule premises.

(4)Property is “available for public access” at an approved establishment if the property is—

(a)on public display at the establishment,

(b)held by the establishment and made available to the public on request for viewing or for educational use, or

(c)held by the establishment for public exhibition in connection with the sale of the property.

(5)An “approved establishment” is—

(a)an approved museum, gallery or other institution within the meaning of Group 9 of Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984, or

(b)any other person, premises or institution designated (or of a description designated) by the Commissioners.

(6)“Public access rule premises” are—

(a)premises in the United Kingdom at which the property is to be, or has been, available for public access, or

(b)other commercial premises in the United Kingdom used by the approved establishment for the storage of property in advance of its being, or after its having been, available for public access at the approved establishment.

(7)Condition C is that, during the relevant period, the property meets condition B for no more than—

(a)two years, or

(b)such longer period as the Commissioners may specify.

(8)“The relevant period” means the period—

(a)beginning with the importation of the property, and

(b)ending when it ceases to be in the United Kingdom after that importation.

(9)“Importation” means the property being brought to, or received or used in, the United Kingdom in circumstances in which section 809L(2)(a) applies.

(10)Condition D is that the property attracts a relevant VAT relief (see section 809Z1).

809Z1Public access rule: relevant VAT relief

(1)Property “attracts a relevant VAT relief” if any of conditions 1 to 4 is met.

(2)Condition 1 is that article 5(1) of the Value Added Tax (Imported Goods) Relief Order 1984 applies in relation to the importation of the property by virtue of Group 9 of Schedule 2 to that Order (importation of works of art or collectors' pieces by museums etc).

(3)Condition 2 is that article 5(1) would so apply if the following requirements were disregarded—

(a)the requirement that the importation be from a third country, and

(b)the requirement that the purpose of the importation be a purpose other than sale.

(4)Condition 3 is that article 576(3)(a) of Commission Regulation (EEC) No 2454/93 (relief from import duties for works of art etc imported for the purposes of exhibition, with a view to possible sale) applies in relation to the importation of the property.

(5)Condition 4 is that article 576(3)(a) would so apply if the requirement that the importation be from a third country were disregarded.

(6)Where the property does not meet condition B in section 809Z at the time of its importation it is to be assumed for the purposes of this section that the property was imported on the day during the relevant period when the property first meets that condition.

(7)“The relevant period” and “importation” have the same meaning as in section 809Z and “imported” is to be read accordingly.

809Z2Personal use rule

(1)Clothing, footwear, jewellery or watches meet the personal use rule if they—

(a)are property of a relevant person, and

(b)are for the personal use of a relevant individual.

(2)In this section—

(a)“relevant person” has the meaning given by section 809M, and

(b)“relevant individual” means an individual who is a relevant person by virtue of section 809M(2)(a), (b), (c) or (d) (the individual with income or gains, or a husband, wife, civil partner, child or grandchild).

809Z3Repair rule

(1)Property meets the repair rule for the whole of the relevant period if, during the whole of that period, the property meets the repair conditions.

(2)Property meets the repair rule for a part of the relevant period if—

(a)during the whole of that part of that period, the property meets the repair conditions, and

(b)during the whole of the other part of that period, or the whole of each other part of that period, the property meets the repair conditions or the public access rule.

(3)Property meets the repair conditions if the property—

(a)is under repair or restoration,

(b)is in transit from a place outside the United Kingdom to repair rule premises, in transit between such premises, or in storage at such premises, in advance of repair or restoration, or

(c)is in storage at such premises, in transit between such premises, or in transit from such premises to a place outside the United Kingdom, following repair or restoration.

(4)“Repair rule premises” means—

(a)premises in the United Kingdom that are to be used, or have been used, for the repair or restoration referred to in subsection (3)(b) or (c), or

(b)other commercial premises in the United Kingdom used by the restorer for the storage of property in advance of, or following, repair or restoration of property by the restorer.

(5)“Restorer” means the person who is to carry out, or has carried out, the repair or restoration referred to in subsection (3)(b) or (c).

(6)Property meets the repair conditions, or the public access rule, during the whole of a period, or the whole of part of a period, if the property meets those conditions or that rule—

(a)on the whole of, or on part of, the first day of that period or part period,

(b)on the whole of, or on part of, the last day of that period or part period, and

(c)on the whole of each other day of that period or part period.

(7)“The relevant period” has the same meaning as in section 809Z.

809Z4Temporary importation rule

(1)Property meets the temporary importation rule if the total number of countable days is 275 or fewer.

(2)A “countable day” is a day on which, or on part of which, the property is in the United Kingdom by virtue of being brought to, or received or used in, the United Kingdom in circumstances in which section 809L(2)(a) applies (whether the current case, or a past case, when the property was so brought, received or used).

(3)A day is not a countable day if, on that day or any part of that day—

(a)the property meets the personal use rule,

(b)the property meets the repair rule, or

(c)the notional remitted amount in relation to the property is less than £1,000.

(4)A day on which, or on part of which, the property meets the public access rule (the “relevant day”) is not a countable day if any of conditions A to C is met.

(5)Condition A is that the property meets the public access rule during the whole of the period of importation in which the relevant day falls.

(6)Condition B is that—

(a)the property does not meet the public access rule during the whole of the period of importation in which the relevant day falls, and

(b)that period of importation—

(i)begins with a period of no public access, and

(ii)ends with a period of public access which immediately follows that period of no public access.

(7)Condition C is that—

(a)the property does not meet the public access rule during the whole of the period of importation in which the relevant day falls, and

(b)during the parts, or each of the parts of the period of importation during which the property does not meet the public access rule it meets the repair conditions.

(8)Section 809Z3(6) applies for the purposes of this section.

(9)“Period of importation” means a period that—

(a)begins when property is brought to, or received or used in, the United Kingdom in circumstances in which section 809L(2)(a) applies, and

(b)ends when the property ceases to be in the United Kingdom after having been so brought, received or used.

(10)“Period of no public access” means a period which is not a period of public access and “period of public access” means a period during the whole of which property meets the public access rule.

809Z5Notional remitted amount

(1)The “notional remitted amount”, in relation to property, is the amount of income that would be taken to be remitted to the United Kingdom in relation to the property (if section 809X did not apply in relation to the property).

(2)If—

(a)property forms part of a set, and

(b)only part of the set is in the United Kingdom,

the notional remitted amount is such part of the amount specified in subsection (3) as is just and reasonable having regard to the part of the set that actually is in the United Kingdom.

(3)That amount is the amount that would be taken to be remitted to the United Kingdom if the complete set had been brought to, or received or used in, the United Kingdom, at the same time as the part in question.

809Z6Exempt property: other interpretation

(1)This section applies for the purposes of sections 809X to 809Z5.

(2)“Property” does not include money.

(3)In subsection (2) “money” includes—

(a)a traveller’s cheque,

(b)a promissory note,

(c)a bill of exchange, and

(d)any other—

(i)instrument that is evidence of a debt, or

(ii)voucher, stamp or similar token or document which is capable of being exchanged for money, goods or services.

(4)References to property being in the United Kingdom are references to the property—

(a)being in the United Kingdom after being brought to, or received in, the United Kingdom in circumstances in which section 809L(2)(a) applies, or

(b)being used in the United Kingdom in circumstances in which section 809L(2)(a) applies.

Interpretation of Chapter
809Z7Interpretation of Chapter

(1)This section applies for the purposes of this Chapter.

(2)An individual’s “foreign income and gains” for a tax year are—

(a)the individual’s relevant foreign earnings for that year,

(b)the individual’s foreign specific employment income for that year,

(c)the individual’s relevant foreign income for that year, and

(d)if the individual is not domiciled in the United Kingdom in that year, the individual’s foreign chargeable gains for that year.

(3)An individual’s “relevant foreign earnings” for a tax year are—

(a)if the individual is ordinarily UK resident in that year, the individual’s chargeable overseas earnings for that year, and

(b)otherwise, the individual’s general earnings within section 26(1) of ITEPA 2003 for that year (non-UK earnings).

(4)An individual’s “foreign specific employment income” for a tax year is such of the individual’s specific employment income for that year as is foreign securities income for the purposes of section 41A of ITEPA 2003.

(5)An individual’s “foreign chargeable gains” for a tax year are the foreign chargeable gains (within the meaning of section 12(4) of TCGA 1992) accruing to the individual in that year.

(6)In subsection (3)(a) “chargeable overseas earnings” has the same meaning as in section 22 of ITEPA 2003 (see section 23 of that Act).

(7)“The Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs.

Employment income

2ITEPA 2003 is amended as follows.

3(1)Section 6 (nature of charge to tax on employment income) is amended as follows.

(2)In subsection (3), omit the “and” at the end of paragraph (a), and after that paragraph insert—

(aa)whether section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to an employee for a tax year, and.

(3)After that subsection insert—

(3A)The rules in Chapter 5A, which are concerned with the matters mentioned in subsection (3)(a) to (b), apply for the purposes of the charge to tax on certain specific employment income arising under Part 7 (securities etc).

4(1)Section 10 (meaning of “taxable earnings” etc) is amended as follows.

(2)In subsection (2), for the words after “with” substitute “Chapters 4 and 5 of this Part”.

(3)After subsection (3) insert—

(4)Subsection (3) is subject to Chapter 5A of this Part (certain specific employment income under Part 7: individuals to whom to remittance basis applies).

5(1)Section 13 (person liable to tax) is amended as follows.

(2)After subsection (4) insert—

(4A)If the tax is on specific employment income received, or remitted to the United Kingdom, after the death of the person in relation to whom the income is, by virtue of Part 7, to count as employment income, the person’s personal representatives are liable for the tax.

(3)In subsection (5), for “In that event” substitute “If subsection (4) or (4A) applies,”.

6For the heading of Chapter 4 of Part 2 substitute “Taxable earnings: UK resident employees”.

7In section 14(1) (taxable earnings under Chapter 4: introduction), for “resident, ordinarily resident and domiciled in UK” substitute “UK resident”.

8For the heading before section 15 substitute “UK resident employees”.

9(1)Section 15 (earnings for year when employee resident, ordinarily resident and domiciled in UK) is amended as follows.

(2)In subsection (1), for the words from “resident”, in the first place, to the end substitute “UK resident.”

(3)For subsection (3) substitute—

(3)Subsection (2) applies whether or not the employment is held when the earnings are received.

(4)Accordingly, in the heading, for “resident, ordinarily resident and domiciled in UK” substitute “UK resident”.

10For the title to Chapter 5 of Part 2 substitute “Taxable earnings: remittance basis rules and rules for non-uk resident employees”.

11(1)Section 20 (taxable earnings under Chapter 5: introduction) is amended as follows.

(2)For subsection (1) substitute—

(1)This Chapter—

(a)contains provision for calculating what are taxable earnings from certain kinds of employment in a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee, and

(b)sets out what are taxable earnings from an employment in a tax year in which the employee is non-UK resident.

(3)In subsection (2), omit paragraphs (b) and (c).

(4)In subsection (3), for “the sections listed in subsection (1)” substitute “sections 22, 26 and 27”.

12For the heading before section 21 substitute “Remittance basis rules for UK ordinarily resident employees”.

13Omit section 21 (earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings).

14(1)Section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK) is amended as follows.

(2)In subsection (1), for the words from “in which” to the end substitute , to the extent that they are chargeable overseas earnings for that year, if—

(a)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year, and

(b)the employee is ordinarily UK resident in that year.

(3)For subsection (3) substitute—

(3)Subsection (2) applies whether or not the employment is held when the earnings are remitted.

(4)In subsection (4), omit the words after “year”.

(5)In subsection (5)(b), for “section 21” substitute “section 15”.

(6)After subsection (5) insert—

(6)See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

(7)General earnings for the employee for the tax year fall within section 15(1) to the extent that they do not fall within subsection (1).

(7)Accordingly, in the heading, for the words from “employee” to the end substitute “remittance basis applies and employee ordinarily UK resident”.

15(1)Section 23 (calculation of chargeable overseas earnings) is amended as follows.

(2)In subsection (1), for “sections 21 and” substitute “section”.

(3)In subsection (2), for paragraph (a) substitute—

(a)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year,

(aa)the employee is ordinarily UK resident in that year,.

16In section 24(7) (limit on chargeable overseas earnings where duties of associated employment performed in UK), for “section 21(1)” substitute “section 15(1)”.

17For the heading before section 25 substitute “Remittance basis rules: employees not UK ordinarily resident”.

18Omit section 25 (UK-based earnings for year when employee resident, but not ordinarily resident, in UK).

19(1)Section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK) is amended as follows.

(2)In subsection (1), for the words from “in which” to “they” substitute “where section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the employee for that year and the employee is not ordinarily UK resident in that year, if the general earnings”.

(3)For subsection (3) substitute—

(3)Subsection (2) applies whether or not the employment is held when the earnings are remitted.

(4)After subsection (4) insert—

(5)See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

(6)General earnings for the employee for the tax year fall within section 15(1) if they do not fall within subsection (1).

(5)Accordingly, in the heading, for the words from “employee” to the end substitute “remittance basis applies and employee not ordinarily UK resident”.

20(1)Section 27 (UK-based earnings for year when employee non-UK resident) is amended as follows.

(2)For subsection (3) substitute—

(3)Subsection (2) applies whether or not the employment is held when the earnings are received.

(3)After subsection (4) insert—

(5)Sections 18 and 19 (time when earnings are received) apply for the purposes of this section.

21Omit sections 31 to 37 (and the heading before section 31).

22After section 41 insert—

Chapter 5ATaxable specific income: effect of remittance basis
41ATaxable specific income from employment-related securities: effect of remittance basis

(1)This section applies if—

(a)an amount within subsection (2) counts as employment income of an individual for a tax year in respect of an employment (“the securities income”), and

(b)any part of the relevant period (see section 41B) is within a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual.

(2)An amount is within this subsection if it counts as employment income under any provision of any of Chapters 2, 3 and 3C to 5 of Part 7 (employment-related securities etc) except section 446UA.

(3)The reference in subsection (2) to an amount that counts as employment income under any of the provisions mentioned there does not include an amount which counts as employment income by virtue of any provision of Chapter 3A or 3B of Part 7.

(4)An amount equal to—

SI - FSI

is an amount of “taxable specific income” from the employment for the tax year mentioned in subsection (1)(a).

(5)In subsection (4)—

(a)SI is the amount of the securities income, and

(b)FSI is the amount of the securities income that is “foreign” (see sections 41C to 41E).

(6)The full amount of any of the foreign securities income which is remitted to the United Kingdom in a tax year is an amount of “taxable specific income” from the employment for that year.

(7)Subsection (6) applies whether or not the employment is held when the foreign securities income is remitted.

(8)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis), treat the relevant securities or securities option as deriving from the foreign securities income.

(9)But where—

(a)the chargeable event is the disposal of the relevant securities or the assignment or release of the relevant securities option, and

(b)the individual receives consideration for the disposal, assignment or release of an amount equal to or exceeding the market value of the relevant securities or securities option,

for the purposes of that Chapter treat the consideration (and not the relevant securities or securities option) as deriving from the foreign securities income.

(10)In this section and section 41B—

  • “the chargeable event” means the event giving rise to the securities income, and

  • “the relevant securities” or “the relevant securities option” means the employment-related securities or employment-related securities option by virtue of which the amount mentioned in subsection (1)(a) counts as employment income.

(11)See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

41BSection 41A: the relevant period

(1)“The relevant period” is to be determined as follows.

(2)In the case of an amount that counts as employment income by virtue of Chapter 2 (restricted securities) or Chapter 3 (convertible securities), the relevant period—

(a)begins with the day of the acquisition, and

(b)ends with the day of the chargeable event.

(3)In the case of an amount that counts as employment income by virtue of section 446U (securities acquired for less than market value: discharge of notional loan)—

(a)if the relevant securities were acquired by virtue of the exercise of a securities option (“the option”), the relevant period—

(i)begins with the day of the acquisition of the option, and

(ii)ends with the day the option vests, and

(b)otherwise, the relevant period is—

(i)the tax year in which the notional loan (within the meaning of Chapter 3C) is treated as made, or

(ii)if the chargeable event occurs in that year, the period beginning at the beginning of that year and ending with the day of that event.

(4)In the case of an amount that counts as employment income by virtue of—

(a)Chapter 3D (securities disposed of for more than market value), or

(b)Chapter 4 (post-acquisition benefits from securities),

the relevant period is the tax year in which the chargeable event occurs.

(5)In the case of an amount that counts as employment income by virtue of Chapter 5 (employment-related securities options), the relevant period—

(a)begins with the day of the acquisition, and

(b)ends with the day of the chargeable event or, if earlier, the day the relevant securities option vests.

(6)In this section “the acquisition” has the same meaning as in Chapters 2 to 4 or Chapter 5 (see section 421B or 471).

(7)For the purposes of this section an option “vests” when it is first capable of being exercised.

(8)References in this section to a Chapter are to a Chapter of Part 7.

41CSection 41A: foreign securities income

(1)The extent to which the securities income is “foreign” is to be determined as follows.

(2)Treat an equal amount of the securities income as accruing on each day of the relevant period.

(3)If any part of the relevant period is within a tax year to which subsection (4) applies, the securities income treated as accruing in that part of the relevant period is “foreign”.

This is subject to section 41D (limit where duties of associated employment performed in UK).

(4)This subsection applies to a tax year if—

(a)section 809B, 809D or 809E of ITA 2007 applies to the individual for the year,

(b)the individual is ordinarily UK resident in the year,

(c)the employment is with a foreign employer, and

(d)the duties of the employment are performed wholly outside the United Kingdom.

(5)If any part of the relevant period is within a tax year to which subsection (6) applies—

(a)if the duties of the employment are performed wholly outside the United Kingdom, the securities income treated as accruing in that part of the relevant period is “foreign”, and

(b)if some but not all of those duties are performed outside the United Kingdom—

(i)the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and

(ii)the income apportioned in respect of duties performed outside the United Kingdom is “foreign”.

(6)This subsection applies to a tax year if—

(a)section 809B, 809D or 809E of ITA 2007 applies to the individual for the year,

(b)the individual is not ordinarily UK resident in the year, and

(c)some or all of the duties of the employment are performed outside the United Kingdom.

(7)If the individual is not resident in the United Kingdom in a tax year, for the purposes of this section treat section 809B of ITA 2007 as applying to the individual for that year.

(8)This section is subject to section 41E (foreign securities income: just and reasonable apportionment).

41DLimit on foreign securities income where duties of associated employment performed in UK

(1)This section imposes a limit on the extent to which section 41C(3) applies in relation to a period when—

(a)the individual holds associated employments as well as the employment in relation to which section 41C(4) applies, and

(b)the duties of the associated employments are not performed wholly outside the United Kingdom.

(2)The amount of the securities income for the period that is to be regarded as “foreign” is limited to such amount as is just and reasonable, having regard to—

(a)the employment income for the period from all the employments mentioned in subsection (1)(a),

(b)the proportion of that income that is general earnings to which section 22 applies (chargeable overseas earnings),

(c)the nature of and time devoted to the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the period, and

(d)all other relevant circumstances.

(3)In this section “associated employments” means employments with the same employer or with associated employers.

(4)Section 24(5) and (6) (meaning of “associated employer”) apply for the purposes of this section.

41EForeign securities income: just and reasonable apportionment

(1)This section applies if the proportion of the securities income that would otherwise be regarded as “foreign” is not, having regard to all the circumstances, one that is just and reasonable.

(2)The amount of the securities income that is “foreign” is such amount as is just and reasonable (rather than the amount calculated in accordance with section 41C).

23Omit Chapter 6 of Part 2 (disputes as to domicile or ordinary residence).

24In section 225 (payments for restrictive undertakings), for subsections (6) and (7) substitute—

(6)This section applies only if—

(a)section 15 applies to any general earnings from the employment, and would apply even if the individual made a claim under section 809B of ITA 2007 (claim for remittance basis) for the tax year mentioned in subsection (3), or

(b)section 27 (UK-based earnings of non-UK resident employee) applies to any general earnings from the employment.

25In section 271(2) (limited exemption of removal benefits and expenses: general)—

(a)in paragraph (a), for the words from “employee” to “UK” substitute “remittance basis applies and employee ordinarily UK resident”, and

(b)in paragraph (b), for the words from “employee” to “UK” substitute “remittance basis applies and employee not ordinarily UK resident”.

26In section 335(4) (application of deductions provisions), omit “, 21, 25”.

27(1)Section 370 (travel costs and expenses where duties performed abroad) is amended as follows.

(2)In subsection (1), for the words from “taxable” to “UK)” substitute “relevant taxable earnings”.

(3)After subsection (5) insert—

(6)In this section “relevant taxable earnings” means general earnings for a tax year in which the employee is ordinarily UK resident that—

(a)are taxable earnings under section 15, and

(b)would be taxable earnings under section 15 even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.

28(1)Section 371 (travel costs and expenses where duties performed abroad: spouse’s travel etc) is amended as follows.

(2)In subsection (1), for the words from “taxable” to “UK)” substitute “relevant taxable earnings”.

(3)After subsection (7) insert—

(8)In this section “relevant taxable earnings” has the meaning given by section 370(6).

29(1)Section 378 (deduction from seafarer’s earnings: eligibility) is amended as follows.

(2)In subsection (1)(a), for the words from “taxable” to the end substitute “relevant taxable earnings,”.

(3)After subsection (4) insert—

(5)In this section “relevant taxable earnings” means general earnings for a tax year in which the employee is ordinarily UK resident that—

(a)are taxable earnings under section 15, and

(b)would be taxable earnings under section 15 even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.

30(1)Section 413 (exception in certain cases of foreign service) is amended as follows.

(2)In subsection (3), for paragraph (a) substitute—

(a)any earnings from the employment would not be relevant earnings, or

(3)After that subsection insert—

(3A)In subsection (3)(a) “relevant earnings” means—

(a)for service in or after the tax year 2008-09, earnings—

(i)which are for a tax year in which the employee is ordinarily UK resident,

(ii)to which section 15 applies, and

(iii)to which that section would apply, even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and

(b)for service before the tax year 2008-09, general earnings to which section 15 or 21 as originally enacted applies.

31In section 421E(1) (income relating to securities: exclusions), for the words from “or 21” to the end substitute “, 22 or 26 applies (earnings for year when employee UK resident).”

32In section 446N (securities subject to restriction during relevant period), after subsection (6) insert—

(7)If any of the employment income arising under section 426 by virtue of the chargeable event is foreign securities income within the meaning of section 41C, reduce the taxable amount mentioned in subsection (5) by the amount of the foreign securities income.

(8)If any of the employment income that would have arisen (if the non-commercial interests mentioned in subsection (6) had been disregarded) under section 426 by virtue of the chargeable event would have been foreign securities income (within that meaning), reduce the taxable amount mentioned in subsection (6) by the amount of the foreign securities income.

33In section 474(1) (securities options: exclusions), for the words from “or 21” to the end substitute “, 22 or 26 applies (earnings for year when employee UK resident).”

34In section 540(2) (EMI: taxable benefits), for the words from “or 21” to the end substitute “applies (earnings for year when employee UK resident).”

35In section 690 (PAYE: employee non-UK resident etc), after subsection (2) insert—

(2A)For the purposes of subsection (2) as it applies in relation to an employee who is UK resident but not ordinarily UK resident in a tax year, the officer may treat section 809B of ITA 2007 (remittance basis) as applying to the employee for that year, even if no claim under that section has been made.

36In section 698 (PAYE: special charges on employment-related securities), after subsection (7) insert—

(8)This section is subject to section 700A (employment-related securities etc: remittance basis).

37In section 700 (PAYE: gains from securities options), after subsection (6) insert—

(7)This section is subject to section 700A (employment-related securities etc: remittance basis).

38After that section insert—

700AEmployment-related securities etc: remittance basis

(1)This section applies if—

(a)section 698 or 700 applies, and

(b)part or all of the amount that counts as employment income is foreign securities income or is likely to be foreign securities income.

(2)The amount of the payment treated under section 696 as made is limited to—

(a)the amount that, on the basis of the best estimate that can reasonably be made, is likely to count as employment income, minus

(b)the amount that, on the basis of such an estimate, is likely to be foreign securities income.

(3)References in this section to “foreign securities income” are to income that is foreign securities income for the purposes of section 41A.

39In section 721(1) (other definitions), for the definition of “foreign employer” substitute—

“foreign employer” means an individual, partnership or body of persons resident outside, and not resident in, the United Kingdom,.

40In Schedule 1 (index of defined expressions), omit the entries relating to—

(a)receipt of money earnings (in Chapter 5 of Part 2), and

(b)receipt of non-money earnings (in Chapter 5 of Part 2).

41In paragraph 8 of Schedule 2 (approved share incentive plans: all-employee nature of plan), for sub-paragraph (2) substitute—

(2)An employee is a UK resident taxpayer if—

(a)the employee’s earnings from the employment by reference to which the employee meets the employment requirement are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), and

(b)those general earnings are (or would be if there were any) earnings for a tax year in which the employee is ordinarily resident in the United Kingdom.

42In paragraph 6(2) of Schedule 3 (approved SAYE option schemes: all-employee nature of scheme), for paragraph (c) substitute—

(c)E’s earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident),

(ca)those general earnings are (or would be if there were any) earnings for a tax year in which E is ordinarily resident in the United Kingdom, and.

43In paragraph 27(2) of Schedule 5 (enterprise management incentives: meaning of “working time”)—

(a)in paragraph (a), for the words from “or 21” to “Kingdom)” substitute “applies (earnings for year when employee UK resident)”, and

(b)in paragraph (b), for the words from “resident and” to the end substitute “UK resident (and none of sections 809B, 809D and 809E of ITA 2007 (remittance basis) applied to the employee).”

44In Schedule 7 (transitionals and savings), omit paragraphs 9 to 12.

Relevant foreign income

45In section 575 of ITEPA 2003 (foreign pensions: taxable pension income), omit subsection (4).

46ITTOIA 2005 is amended as follows.

47In section 260(1) (overview of Part 3)—

(a)at the end of paragraph (d) insert “and”, and

(b)omit paragraph (f) (and the “and” before it).

48In section 269 (territorial scope of charge to tax), omit subsections (3) and (4).

49Omit Chapter 11 of Part 3 (overseas property income).

50In section 829 (overview of Part 8), for paragraph (a) substitute—

(a)the charging of relevant foreign income of a person to whom section 809B, 809D or 809E of ITA 2007 applies (remittance basis),.

51(1)Section 830 (meaning of “relevant foreign income”) is amended as follows.

(2)In subsection (1), for the words from “which” to the end substitute which—

(a)arises from a source outside the United Kingdom, and

(b)is chargeable under any of the provisions specified in subsection (2) (or would be so chargeable if section 832 did not apply to it).

(3)In subsection (2), omit paragraph (d).

52Omit section 831 (claims for relevant foreign income to be charged on remittance basis).

53For section 832 substitute—

832Relevant foreign income charged on remittance basis

(1)This section applies to an individual’s relevant foreign income for a tax year (“the relevant foreign income”) if section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year.

(2)For any tax year in which—

(a)the individual is UK resident, and

(b)any of the relevant foreign income is remitted to the United Kingdom,

income tax is charged on the full amount of the relevant foreign income so remitted in that year.

(3)Subsection (2) applies whether or not the source of the income exists when the income is remitted.

(4)See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

832ASection 832: temporary non-residents

(1)This section applies if—

(a)an individual satisfies the residence requirements for any tax year (“the year of return”),

(b)the individual did not satisfy those requirements for one or more tax years immediately before the year of return but did satisfy those requirements for an earlier tax year,

(c)there are fewer than 5 tax years between—

(i)the last tax year before the year of return for which the individual satisfied those requirements (“the year of departure”), and

(ii)the year of return, and

(d)the individual satisfied those requirements for at least 4 out of the 7 tax years immediately before the year of departure.

(2)Treat any of the individual’s relevant foreign income within subsection (3) which is remitted to the United Kingdom after the year of departure and before the year of return as remitted to the United Kingdom in the year of return.

(3)Relevant foreign income is within this subsection if—

(a)it is for the year of departure or any earlier tax year, and

(b)section 832 applies to it.

(4)For the purposes of subsection (1) an individual “satisfies the residence requirements” for a tax year if—

(a)at any time in that year, the individual is UK resident and not Treaty non-resident, or

(b)the individual is ordinarily UK resident, and is not Treaty non-resident, for that year.

(5)For the purposes of subsection (4) an individual is “Treaty non-resident” at any time if, at that time, he is regarded as resident in a territory outside the United Kingdom for the purposes of double taxation relief arrangements having effect at that time.

(6)In subsection (5) “double taxation relief arrangements” means arrangements specified in an Order in Council making any such provisions as are referred to in section 788 of ICTA.

832BSection 832: deductions from remitted income

(1)The only case in which deductions are allowed from the income mentioned in section 832(2) is where the income is from a trade, profession or vocation carried on outside the United Kingdom.

(2)In that case the same deductions are allowed as are allowed under the Income Tax Acts where the trade, profession or vocation is carried on in the United Kingdom.

54Omit sections 833 to 837.

Chargeable gains

55TCGA 1992 is amended as follows.

56(1)Section 3 (annual exempt amount) is amended as follows.

(2)After subsection (1) insert—

(1A)Subsection (1) does not apply to an individual for a tax year if section 809B of ITA 2007 (claim for remittance basis to apply) applies to the individual for that year.

(3)In subsection (5C)—

(a)after paragraph (a) insert—

(aa)if section 16ZB (certain chargeable gains charged on remittance basis) applies for that year, deducting the amount of the relevant gains (within the meaning of that section), and

(b)in paragraph (b), after “deducting” insert “(from the amount mentioned in paragraph (a), as reduced under paragraph (aa))”.

57In section 3A (reporting limits), after subsection (5) insert—

(5A)Subsection (1) does not apply to an individual for a tax year if—

(a)section 809B of ITA 2007 (claim for remittance basis to apply), or

(b)section 16ZB below (certain chargeable gains charged on remittance basis),

applies to the individual for that year.

58In section 9 (residence etc), omit subsection (2).

59In section 10A (temporary non-residents), after subsection (9) insert—

(9ZA)If—

(a)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the taxpayer for the year of return, and

(b)the taxpayer is not domiciled in the United Kingdom in that year,

any foreign chargeable gains falling within subsection (2)(a) which were remitted in an intervening year are treated as remitted in the year of return.

For this purpose “foreign chargeable gains” has the meaning given by section 12(4).

60For section 12 substitute—

12Non-UK domiciled individuals to whom remittance basis applies

(1)This section applies to foreign chargeable gains accruing to an individual in a tax year (“the foreign chargeable gains”) if—

(a)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year, and

(b)the individual is not domiciled in the United Kingdom in that year.

(2)Chargeable gains are treated as accruing to the individual in any tax year in which any of the foreign chargeable gains are remitted to the United Kingdom.

(3)The amount of chargeable gains treated as accruing is equal to the full amount of the foreign chargeable gains so remitted in that year.

(4)In this section “foreign chargeable gains” means chargeable gains accruing from the disposal of an asset which is situated outside the United Kingdom.

(5)See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

61In section 16 (computation of losses), omit subsection (4).

62After that section insert—

16ZALosses: non-UK domiciled individuals

(1)In this section “the relevant tax year”, in relation to an individual, means the first tax year for which—

(a)section 809B of ITA 2007 (claim for remittance basis) applies to the individual, and

(b)the individual is not domiciled in the United Kingdom.

(2)An individual may make an election under this section for the relevant tax year (in which case sections 16ZB and 16ZC have effect in relation to the individual for the relevant tax year and all subsequent tax years).

(3)If an individual does not make such an election, foreign losses accruing to the individual in—

(a)the relevant tax year, or

(b)any subsequent tax year except one in which the individual is domiciled in the United Kingdom,

are not allowable losses.

(4)Sections 42 and 43 of the Management Act (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to an election under this section as they apply in relation to a claim for relief.

(5)An election under this section is irrevocable.

(6)In this section “foreign loss” means a loss accruing from the disposal of an asset situated outside the United Kingdom.

16ZBIndividual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrue

(1)This section applies to an individual for a tax year (“the applicable tax year”) if—

(a)the individual has made an election under section 16ZA,

(b)foreign chargeable gains accrued to the individual in or after the relevant tax year (within the meaning of section 16ZA) but before the applicable tax year, and

(c)by reason of the remission of any of the foreign chargeable gains to the United Kingdom, chargeable gains are treated under section 12 as accruing to the individual in the applicable tax year (“the relevant gains”).

(2)Section 2(2) or (4) has effect for the applicable tax year as if the relevant gains had not accrued.

(3)The amount on which the individual is charged to capital gains tax for the applicable tax year is (instead of the amount given by section 2(2) or (4)(b), as reduced under section 3) the sum of—

(a)the adjusted taxable amount, and

(b)the amount of the relevant gains.

(4)“The adjusted taxable amount” is—

(a)if section 3(1) (annual exempt amount) does not apply to the individual for the applicable tax year, the amount given by section 2(2) or (4)(b) as it has effect by virtue of subsection (2), and

(b)otherwise, so much of that amount as exceeds the exempt amount for the applicable tax year (within the meaning of section 3).

(5)In subsection (1) “foreign chargeable gains” has the meaning given by section 12(4).

(6)For the purposes of subsection (1)(c) foreign chargeable gains are remitted to the United Kingdom if they are regarded as so remitted for the purposes of section 12.

16ZCIndividual who has made election under section 16ZA and to whom remittance basis applies

(1)This section applies to an individual for a tax year if—

(a)the individual has made an election under section 16ZA for the tax year or any earlier tax year,

(b)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the tax year, and

(c)the individual is not domiciled in the United Kingdom in the tax year.

(2)The following steps apply for the purpose of calculating the amount on which the individual is to be charged to capital gains tax for the tax year.

  • Step 1

    Deduct any relevant allowable losses from the chargeable gains referred to in subsection (3) in the order in which they appear there (starting with paragraph (a) of that subsection).

    If allowable losses are deductible from the chargeable gains referred to in subsection (3)(b) but are not enough to exhaust them all—

    (a)

    those chargeable gains are to be ordered according to the day on which they accrued,

    (b)

    the losses are to be deducted from those gains in reverse chronological order (starting with the last chargeable gain to accrue), and

    (c)

    if allowable losses are deductible from chargeable gains that accrued on a particular day but are not enough to exhaust all of the chargeable gains that accrued on that day, the amount deducted from each of those chargeable gains is the appropriate proportion of the losses.

    In paragraph (c) “the appropriate proportion”, in relation to a chargeable gain, is the amount of that gain divided by the total amount of the chargeable gains that accrued on the day in question.

  • Step 2

    Treat the amount referred to in section 2(2) or (4)(a) or 16ZB(3)(a) as being equal to—

    (a)

    the amount it would be if there were no relevant allowable losses, minus

    (b)

    the total amount deducted under Step 1 from chargeable gains within subsection (3)(a) or (c).

(3)The chargeable gains are—

(a)foreign chargeable gains accruing to the individual in the tax year, to the extent that they are remitted to the United Kingdom in that year,

(b)foreign chargeable gains accruing to the individual in that year, to the extent that they are not so remitted in that year, and

(c)chargeable gains accruing to the individual in that year (other than foreign chargeable gains).

(4)Chargeable gains treated as accruing under section 87 or 89(2) (read, where appropriate, with section 10A) are not within any paragraph of subsection (3).

(5)Chargeable gains treated as accruing under section 12 are not within subsection (3)(c).

(6)For the purposes of subsection (3) foreign chargeable gains are remitted to the United Kingdom if they are regarded as so remitted for the purposes of section 12.

(7)In this section—

  • “relevant allowable losses” means the allowable losses that section 2(2) provides may be deducted from chargeable gains accruing to the individual in the tax year, and

  • “foreign chargeable gains” has the meaning given by section 12(4).

16ZDSection 16ZC: supplementary

(1)This section applies if section 16ZC applies to an individual for a tax year.

(2)Any allowable loss deducted under step 1 of section 16ZC(2) is to be regarded (for the purposes of section 2(2)(b)) as allowed as a deduction from chargeable gains accruing to the individual in the tax year.

(3)If a deduction is made under step 1 of section 16ZC(2) from a foreign chargeable gain within section 16ZC(3)(b), the amount of the foreign chargeable gain is reduced by the amount deducted.

63In section 119A (increase in expenditure by reference to tax charged in relation to employment-related securities), after subsection (5) insert—

(5A)See also section 119B (unremitted foreign securities income).

64After that section insert—

119BSection 119A: unremitted foreign securities income

(1)For the purposes of section 119A reduce the amount that counts as employment income by so much of that amount (if any) as is unremitted foreign securities income.

(2)In this section “unremitted foreign securities income” means income that—

(a)is foreign securities income for the purposes of section 41A of ITEPA 2003 (employment income from ERS charged on remittance basis), and

(b)has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs.

(3)The following provisions apply if any of the unremitted foreign securities income is remitted to the United Kingdom after the end of the tax year referred to in subsection (2)(b).

(4)The person liable for the capital gains tax on any chargeable gains arising on the disposal may make a claim for section 119A(2) to have effect as if the remitted income had been remitted before the end of that tax year.

(5)All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to a claim under subsection (4).

(6)Those adjustments may be made at any time, despite anything to the contrary in any enactment relating to capital gains tax.

Minor and consequential amendments

65In section 33(2A) of TMA 1970 (error or mistake)—

(a)omit the “or” at the end of paragraph (a), and

(b)at the end of paragraph (b) insert , or

(c)an error or mistake consisting of the making of a claim under section 809B of ITA 2007 (claim for remittance basis).

66ITTOIA 2005 is amended as follows.

67In section 839 (annual payments payable out of relevant foreign income), omit subsection (6).

68In section 840 (relief for backdated pensions charged on arising basis), omit subsection (4) (application of section 837).

69After that section insert—

840AClaims under section 840

(1)A claim under section 840 must be made on or before the fifth anniversary of the normal self-assessment filing date for the tax year for which the relief is claimed.

(2)All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to section 840.

(3)Those adjustments may be made at any time, despite anything to the contrary in the Income Tax Acts.

(4)A person’s personal representatives may make any claim under section 840 which the person might have made.

(5)If a person dies—

(a)any tax paid by the person and repayable because of a claim under section 840 is to be repaid to the personal representatives, and

(b)the person’s personal representatives are liable for any additional tax which arises because of a claim under that section.

(6)If subsection (5)(b) applies, the additional tax—

(a)is to be assessed on the personal representatives, and

(b)is a debt due and payable out of the estate.

70(1)Section 857 (partners to whom the remittance basis may apply) is amended as follows.

(2)In subsection (1), for paragraph (c) substitute—

(c)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to a partner for a tax year.

(3)In subsection (3), omit “for the purposes of this Act (see Part 8)”.

(4)Accordingly, in the heading, for “may apply” substitute “applies”.

71In section 878 (definitions), omit subsection (2).

72In Schedule 2 (transitional provision etc), omit paragraphs 150 and 151.

73In Part 2 of Schedule 4 (index of defined expressions), omit the entry for “person to whom the remittance basis applies”.

74ITA 2007 is amended as follows.

75In section 2(14) (overview of Act), before paragraph (a) insert—

(za)an alternative basis for charge (the remittance basis) for certain income and gains of certain individuals (Chapter A1),.

76In section 34 (personal allowances etc: introduction), after subsection (2) insert—

(3)For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to personal allowance or blind person’s allowance).

77In section 42 (tax reductions for married couples etc: introduction), after subsection (4) insert—

(5)For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to tax reduction).

78In section 460 (residence etc of claimants for relief for life insurance payments etc), after subsection (3) insert—

(4)For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement under section 457, 458 or 459).

79In consequence of the amendments made by this Part of this Schedule, omit—

(a)in ITEPA 2003, paragraph 208 of Schedule 6,

(b)in ITTOIA 2005, paragraph 429 of Schedule 1, and

(c)in CRCA 2005, paragraphs 102(3)(b) to (d) and 104 of Schedule 4.

Commencement

80The amendments made by paragraphs 3(3), 4(3), 5(2), 22, 31 to 33, 38 and 64 have effect in relation to employment-related securities and employment-related securities options where the date of the acquisition is on or after 6 April 2008 (except employment-related securities acquired pursuant to a securities option acquired before 6 April 2008).

81The other amendments made by this Part of this Schedule have effect for the tax year 2008-09 and subsequent tax years.

Transitional provision

82(1)This paragraph applies in relation to an individual’s general earnings for the tax year 2007-08 or any earlier tax year (“the relevant tax year”) if the individual—

(a)was UK resident in that year, but

(b)was not domiciled in the United Kingdom, or was not ordinarily UK resident, in that year.

(2)Section 22 or 26 of ITEPA 2003 (as amended by this Part of this Schedule) applies in relation to the general earnings as if—

(a)section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year, and

(b)section 22(7) or 26(6) of ITEPA 2003 were omitted.

(3)In relation to the general earnings, the definition of “foreign employer” in section 721(1) of ITEPA 2003 has effect as if at the end there were inserted “and not resident in the Republic of Ireland”.

83(1)This paragraph applies to an individual’s relevant foreign income for the tax year 2007-08 or any earlier tax year (“the relevant tax year”) if—

(a)the individual made a claim under section 831 of ITTOIA 2005 for the relevant tax year, or

(b)section 65(5) of ICTA (or any earlier superseded enactment corresponding to that provision) applied in relation to the individual for the relevant tax year.

(2)Section 832 of ITTOIA 2005 (as amended by this Part of this Schedule) applies in relation to the relevant foreign income as if section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year.

(3)But nothing in section 832 of ITTOIA 2005 applies in relation to any of the relevant foreign income that arose in the Republic of Ireland.

(4)Nothing in section 832A of that Act applies in relation to anything remitted to the United Kingdom in the tax year 2007-08 or any earlier tax year.

84(1)This paragraph applies if section 12 of TCGA 1992 (or any corresponding superseded enactment) applied in relation to a gain accruing to an individual in the tax year 2007-08 or any earlier tax year (“the relevant tax year”).

(2)Section 12 of TCGA 1992 (as amended by this Part of this Schedule) applies in relation to that gain as if section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year.

(3)Nothing in section 10A of TCGA 1992 applies in relation to any part of the gain remitted to the United Kingdom in the tax year 2007-08 or any earlier tax year.

85(1)In section 809E(3)(b) of ITA 2007, the reference to a tax year for which section 809B, 809D or 809E of that Act applies to an individual includes a tax year (not later than the tax year 2007-08) in which the individual—

(a)was UK resident, but

(b)was not domiciled in the United Kingdom or was not ordinarily UK resident.

(2)In relation to such a tax year, the reference there to the individual’s foreign income and gains includes the individual’s relevant foreign income if (and only if)—

(a)the individual made a claim under section 831 of ITTOIA 2005 for the year, or

(b)section 65(5) of ICTA (or any earlier superseded enactment corresponding to that provision) applied in relation to the individual for the year.

86(1)Section 809L of ITA 2007 (meaning of “remitted to the United Kingdom”) has effect subject to this paragraph.

(2)If, before 6 April 2008, property (including money) consisting of or deriving from an individual’s relevant foreign income was brought to or received or used in the United Kingdom by or for the benefit of a relevant person, treat the relevant foreign income as not remitted to the United Kingdom on or after that date (if it otherwise would be regarded as so remitted).

(3)If, before 12 March 2008, property (other than money) consisting of or deriving from an individual’s relevant foreign income was acquired by a relevant person, treat the relevant foreign income as not remitted to the United Kingdom on or after 6 April 2008 (if it otherwise would be regarded as so remitted).

(4)Subject to sub-paragraphs (2) and (3), in relation to an individual’s income and chargeable gains for the tax year 2007-08 or any earlier tax year, section 809L has effect as if the references to a relevant person were to the individual.

(5)“Money” has the same meaning as in section 809Y of ITA 2007.

87Section 809N of ITA 2007 (section 809L: gift recipients, qualifying property and enjoyment) has effect in relation to an individual’s income and chargeable gains for the tax year 2007-08 or any earlier tax year as if—

(a)the reference in subsection (2) to a relevant person were to the individual,

(b)subsections (3) and (4) were omitted, and

(c)the references in subsection (9) to a relevant person, all relevant persons, or relevant persons were to the individual.

88Section 809O of ITA 2007 (section 809L: dealings where there is a connected operation) has effect in relation to an individual’s income and chargeable gains for the tax year 2007-08 or any earlier tax year as if—

(a)subsection (2) were omitted, and

(b)the references in subsections (4) and (6) to a relevant person, all relevant persons, or relevant persons were to the individual.

89Sections 809Q to 809S of ITA 2007 (transfers from mixed funds) do not apply for the purposes of determining whether income or chargeable gains for the tax year 2007-08 or any earlier tax year are remitted to the United Kingdom (or the amount of any such income or chargeable gains so remitted).

90(1)This paragraph applies if—

(a)before 12 March 2008, money was lent to an individual outside the United Kingdom,

(b)the loan was made for the purpose of enabling the individual to acquire an interest in residential property in the United Kingdom (and for no other purpose), and

(c)before 6 April 2008—

(i)the money was received in the United Kingdom,

(ii)the individual used the money to acquire an interest in residential property in the United Kingdom (“the interest”), and

(iii)repayment of the debt for the money (“the debt”), or of payments made under a guarantee of that repayment (“the guarantee”), was secured on the interest.

(2)Relevant foreign income of the individual used outside the United Kingdom before 6 April 2028 to pay interest on the debt is treated as not remitted to the United Kingdom.

(3)If, at any time on or after 12 March 2008—

(a)any term upon which the loan was made, or any term of the guarantee, is varied or waived,

(b)repayment of the debt, or of payments made under the guarantee, ceases to be secured on the interest,

(c)repayment of any other debt is secured on the interest or is guaranteed by the guarantee, or

(d)the interest ceases to be owned by the individual,

sub-paragraph (2) does not apply in relation to relevant foreign income used as mentioned there after that time.

(4)If—

(a)before 12 March 2008, money was lent to the individual outside the United Kingdom (“the subsequent loan”),

(b)the subsequent loan was made for the purpose of enabling the individual to repay—

(i)the loan mentioned in sub-paragraph (1), or

(ii)another loan in relation to which sub-paragraphs (2) and (3) apply (by virtue of this sub-paragraph),

and for no other purpose, and

(c)before 6 April 2008—

(i)the individual used the money to repay the loan referred to in paragraph (b)(i) or (ii), and

(ii)repayment of the subsequent loan, or of payments made under a guarantee of that repayment, was secured on the interest,

sub-paragraphs (2) and (3) apply in relation to the subsequent loan (and for this purpose references there to the debt or the loan are to be read as references to the subsequent loan).

(5)In this paragraph “residential property” has the same meaning as in Part 4 of FA 2003 (see section 116 of that Act).

(6)In this paragraph “guarantee” includes an indemnity, and “guaranteed” is to be read accordingly.

91(1)This paragraph applies in relation to employment-related securities if—

(a)the date of the acquisition is on or after 6 April 2008 and on or before 31 July 2008, and

(b)Chapter 2 of Part 7 of ITEPA 2003 (restricted securities) applies in relation to the securities by virtue only of amendments made by this Schedule.

(2)Section 431 of ITEPA 2003 (election for full or partial disapplication of Chapter) has effect in relation to the employment-related securities as if in subsection (5)(b) for “more than 14 days after the acquisition” there were substituted “after 14 August 2008”.

Part 2Non-resident companies and trusts etc

Offshore income gains

92(1)Section 761 of ICTA (charge to income tax or corporation tax of offshore income gain) is amended as follows.

(2)For subsection (5) substitute—

(5)Subsections (1)(b) and (1A) are subject to section 762ZB (income treated as arising: non-UK domiciled individuals to whom remittance basis applies).

(3)After subsection (7) insert—

(8)Nothing in subsection (7) affects the application of this section in relation to an offshore income gain treated as arising by virtue of section 762(3).

93(1)Section 762 of that Act (offshore income gains accruing to persons resident or domiciled abroad) is amended as follows.

(2)In subsection (1), after paragraph (a) insert—

(aa)any reference to anything accruing is to be read as a reference to it arising (and similar references are to be read accordingly);.

(3)For subsections (2) to (5) substitute—

(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.

(4)In subsection (6)—

(a)for “subsection (2) above” substitute “(3)”,

(b)for “accrued” substitute “arisen”, and

(c)omit “Chapter 2 of Part 13 of ITA 2007 or”.

94After that section insert—

762ZAOffshore 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 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.

762ZBIncome treated as arising under section 761(1): remittance basis

(1)This section applies to income treated as arising under section 761(1) to an individual in a tax year if—

(a)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year, and

(b)the individual is not domiciled in the United Kingdom in that year.

(2)Treat the income as relevant foreign income of the individual.

(3)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—

(a)treat any consideration obtained on the disposal of the asset as deriving from the income, and

(b)unless the consideration so obtained is of an amount equal to the market value of the asset, treat the asset as deriving from the income.

(4)In subsection (3)—

(a)“the asset” means the asset the disposal of which causes the income to be treated as arising, and

(b)“the disposal” means the disposal mentioned in paragraph (a).

95In Schedule 10 to TCGA 1992 (consequential amendments), omit paragraph 14(47)(c) and (48)(b) to (d).

96In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”), after paragraph (a) insert—

(aa)section 762ZB(2) of ICTA (offshore income gains),.

97In 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).

Offshore income gains: commencement etc

98The amendments made by paragraphs 92 to 97 have effect for the tax year 2008-09 and subsequent tax years.

99Paragraphs 120 and 121 apply 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, and

(c)Step 1 of paragraph 120(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.

100(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.

101(1)This paragraph applies if—

(a)the trustees of a settlement have made an election under paragraph 126(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 (9) to (18) of paragraph 126 (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).

102(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 126(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 101 applies in relation to the transferee settlement, paragraph 126(9) as applied by paragraph 101(3) has effect as if the reference there to relevant assets included relevant assets within the meaning of paragraph 127(4) (as modified by sub-paragraph (4)(b) below).

(3)If paragraph 101 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 (4) to (7) of paragraph 127 (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.

Attribution of gains to members of non-resident companies

103In section 13(2) of TCGA 1992 (attribution of gains to members of non-resident companies), for the words from “, who, if” to “and who” substitute “and”.

104After section 14 of that Act insert—

14ASection 13: non-UK domiciled individuals

(1)This section applies if—

(a)by virtue of section 13, part of a chargeable gain that accrues to a company on the disposal of an asset is treated as accruing to an individual in a tax year, and

(b)the individual is not domiciled in the United Kingdom in that year.

(2)The part of the chargeable gain treated as accruing to the individual (“the deemed chargeable gain”) is a foreign chargeable gain within the meaning of section 12 if (and only if) the asset is situated outside the United Kingdom.

(3)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—

(a)treat any consideration obtained by the company on the disposal of the asset as deriving from the deemed chargeable gain, and

(b)unless the consideration so obtained is of an amount equal to the market value of the asset, treat the asset as deriving from the deemed chargeable gain.

(4)If—

(a)the deemed chargeable gain is a foreign chargeable gain (within the meaning of section 12),

(b)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year mentioned in subsection (1), and

(c)any of the deemed chargeable gain is remitted to the United Kingdom in a tax year after that year,

the chargeable gain treated under section 12(2) as accruing may not be reduced or extinguished under section 13(8).

105The amendments made by paragraphs 103 and 104 have effect in relation to chargeable gains accruing on or after 6 April 2008.

Attribution of gains to beneficiaries

106TCGA 1992 is amended as follows.

107In section 85(11) (disposal of interests in non-resident settlements), for the words from “there would” to the end substitute “chargeable gains would be treated under section 89(2) or paragraph 8 of Schedule 4C as accruing in the following year of assessment to a beneficiary who received a capital payment from the trustees of the settlement in that year.”

108For section 87 substitute—

87Non-UK resident settlements: attribution of gains to beneficiaries

(1)This section applies to a settlement for a tax year (“the relevant tax year”) if the trustees are neither resident nor ordinarily resident in the United Kingdom in that year.

(2)Chargeable gains are treated as accruing in the relevant tax year to a beneficiary of the settlement who has received a capital payment from the trustees in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount for the relevant tax year or any earlier tax year.

(3)The amount of chargeable gains treated as accruing is equal to—

(a)the amount of the capital payment, or

(b)if only part of the capital payment is matched, the amount of that part.

(4)The section 2(2) amount for a settlement for a tax year for which this section applies to the settlement is—

(a)the amount upon which the trustees of the settlement would be chargeable to tax under section 2(2) for that year if they were resident and ordinarily resident in the United Kingdom in that year, or

(b)if section 86 applies to the settlement for that year, the amount mentioned in paragraph (a) minus the total amount of chargeable gains treated under that section as accruing in that year.

(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.

87ASection 87: matching

(1)This section supplements section 87.

(2)The following steps are to be taken for the purposes of matching capital payments with section 2(2) amounts.

  • Step 1

    Find the section 2(2) amount for the relevant tax year.

  • Step 2

    Find the total amount of capital payments received by the beneficiaries from the trustees in the relevant tax year.

  • Step 3

    The section 2(2) amount for the relevant tax year is matched with—

    (a)

    if the total amount of capital payments received in the relevant tax year does not exceed the section 2(2) amount for the relevant tax year, each capital payment so received, and

    (b)

    otherwise, the relevant proportion of each of those capital payments.

    “The relevant proportion” is the section 2(2) amount for the relevant tax year divided by the total amount of capital payments received in the relevant tax year.

  • Step 4

    If paragraph (a) of Step 3 applies—

    (a)

    reduce the section 2(2) amount for the relevant tax year by the total amount of capital payments referred to there, and

    (b)

    reduce the amount of those capital payments to nil.

    If paragraph (b) of that Step applies—

    (a)

    reduce the section 2(2) amount for the relevant tax year to nil, and

    (b)

    reduce the amount of each of the capital payments referred to there by the relevant proportion of that capital payment.

  • Step 5

    Start again at Step 1 (unless subsection (3) applies).

    If the section 2(2) amount for the relevant tax year (as reduced under Step 4) is not nil, read references to capital payments received in the relevant tax year as references to capital payments received in the latest tax year which—

    (a)

    is before the last tax year for which Steps 1 to 4 have been undertaken, and

    (b)

    is a tax year in which capital payments (the amounts of which have not been reduced to nil) were received by beneficiaries.

    If the section 2(2) amount for the relevant tax year (as so reduced) is nil, read references to the section 2(2) amount for the relevant tax year as the section 2(2) amount for the latest tax year—

    (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.

(3)This subsection applies if—

(a)all of the capital payments received by beneficiaries from the trustees in the relevant tax year or any earlier tax year have been reduced to nil, or

(b)the section 2(2) amounts for the relevant tax year and all earlier tax years have been reduced to nil.

(4)The effect of any reduction under Step 4 of subsection (2) is to be taken into account in any subsequent application of this section.

87BSection 87: remittance basis

(1)This section applies if—

(a)chargeable gains are treated under section 87 as accruing to an individual in a tax year,

(b)section 809B, 809D or 809E (remittance basis) applies to the individual for that year, and

(c)the individual is not domiciled in the United Kingdom in that year.

(2)The chargeable gains are foreign chargeable gains within the meaning of section 12 (non-UK domiciled beneficiaries to whom remittance basis applies).

(3)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis) treat relevant property or benefits as deriving from the chargeable gains.

(4)For the purposes of subsection (3) property or a benefit is “relevant” if the capital payment by reason of which the chargeable gains are treated as accruing consists of—

(a)the payment or transfer of the property or its becoming property to which section 60 applies, or

(b)the conferring of the benefit.

87CSections 87 and 87A: disregard of certain capital payments

(1)For the purposes of sections 87 and 87A as they apply in relation to a settlement, no account is to be taken of a capital payment (or a part of a capital payment) within subsection (2).

(2)A capital payment is within this subsection if (and to the extent that) it is received (or treated as received) in a tax year from the trustees of the settlement 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).

109(1)Section 88 (gains of dual resident settlements) is amended as follows.

(2)For subsection (2) substitute—

(2)The section 2(2) amount for a tax year for which section 87 applies by virtue of this section is what it would be if the amount mentioned in section 87(4)(a) were the assumed chargeable amount.

(3)Omit subsection (7).

110(1)Section 89 (migrant settlements) is amended as follows.

(2)In subsection (1), for “section 87 if” substitute “sections 87 and 87A if”.

(3)For subsections (2) and (3) substitute—

(1A)Subsection (2) applies to a settlement if—

(a)a non-resident period is succeeded by a resident period, and

(b)in relation to the last tax year in the non-resident period (“the last non-resident tax year”), section 87A(3) applied by virtue of paragraph (a) of that provision (exhaustion of capital payments).

(2)Chargeable gains are treated as accruing in a tax year (in the resident period) to a beneficiary of the settlement who receives a capital payment from the trustees in that year if all or part of the capital payment is matched (under section 87A as it applies for that year) with the section 2(2) amount for the last non-resident tax year or any earlier tax year.

(3)Section 87(3) and (4) and sections 87A to 87C apply for the purposes of subsection (2) as if the relevant tax year were the tax year mentioned in subsection (2).

(4)Section 87B (remittance basis) applies in relation to chargeable gains treated under subsection (2) as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.

111For section 90 substitute—

90Sections 87 and 89(2): transfers between settlements

(1)This section applies if 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”).

(2)In this section “the year of transfer” means the tax year in which the transfer occurs.

(3)Treat the section 2(2) amount for the transferee settlement for any tax year (not later than the year of transfer) as increased by—

(a)the section 2(2) amount for the transferor settlement for that year (as reduced under section 87A as it applies in relation to that settlement for the year of transfer and all earlier tax years), or

(b)if part only of the settled property is transferred, the relevant proportion of the amount mentioned in paragraph (a).

(4)“The relevant proportion” is—

(a)the market value of the property transferred, divided by

(b)the market value of the property comprised in the transferor settlement immediately before the transfer.

(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 subsection (3).

(6)If neither section 87 nor section 89(2) would otherwise apply to the transferee settlement for the year of transfer—

(a)section 89(2) to (4) apply to the settlement for that year (and subsequent tax years), and

(b)for this purpose, references there to the last non-resident tax year are to be read as the year of transfer.

(7)The increase under subsection (3) has effect for the year of transfer and subsequent tax years.

(8)The reduction under subsection (5) has effect for tax years after the year of transfer.

(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.

(10)This section does not apply to—

(a)a transfer to which Schedule 4B applies, or

(b)any section 2(2) amount that is in a Schedule 4C pool (see paragraph 1 of Schedule 4C).

90ASection 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).

112(1)Section 91 (increase in tax payable under section 87 or 89(2)) is amended as follows.

(2)For subsection (1) substitute—

(1)This section applies if—

(a)chargeable gains are treated under section 87 or 89(2) as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”),

(b)the beneficiary is charged to tax by virtue of that matching, and

(c)the capital payment was made more than one year after the end of the relevant tax year.

(1A)Where part of a capital payment is matched, references in subsections (2) and (3) to the capital payment are to the part matched.

(3)In subsection (5)(a), for the words from “year” to the end (excluding the “and”) substitute “tax year immediately after the relevant tax year,”.

(4)Omit subsection (8).

113Omit sections 92 to 95 (matching).

114Omit—

(a)in FA 1998, section 130(1) and (4), and paragraph 6(3) and (4) of Schedule 21,

(b)in FA 2002, paragraph 6 of Schedule 11,

(c)in FA 2003, section 163(3), and

(d)in FA 2006, paragraphs 34(2)(d) and 36(2)(a) of Schedule 12.

Attribution of gains to beneficiaries: commencement etc

115The amendments made by paragraphs 106 to 114 have effect for the tax year 2008-09 and subsequent tax years.

116For the purposes of sections 87 and 87A of TCGA 1992, no account is to be taken of—

(a)any capital payment received before 10 March 1981, or

(b)any capital payment received on or after that date but before 6 April 1984, so far as it represents a chargeable gain which accrued to the trustees before 6 April 1981.

117In the application of section 87 of TCGA 1992 for a tax year by virtue of section 88, no account is to be taken of any capital payment received before 6 April 1991.

118(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.

119Section 87C of TCGA 1992 does not apply in relation to any capital payment received before 6 April 2008.

120(1)This paragraph applies to a settlement if section 87 or 89(2) of TCGA 1992 applied to it for the tax year 2007-08 or any earlier tax year.

(2)The following steps are to be taken for the purposes of calculating the section 2(2) amount for the settlement for the tax year 2007-08 and earlier tax years.

  • Step 1

    Calculate (in accordance with section 87 and, where appropriate, section 88) the section 2(2) amount for the settlement for the tax year 2007-08 and earlier tax years.

    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.

  • Step 2

    Find the total amount of chargeable gains treated under section 87 or 89(2) as accruing to beneficiaries of the settlement in the tax year 2007-08 or any earlier tax year (“the total deemed gains”).

  • Step 3

    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.

    Otherwise, reduce that section 2(2) amount by the amount of the total deemed gains.

  • Step 4

    Reduce the total deemed gains by the amount by which the section 2(2) amount was reduced under Step 3.

  • Step 5

    If the total deemed gains is not nil, start again at Step 3.

    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.

(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 121).

121(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 120(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 120(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 120(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 120(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.

122(1)If all of a capital payment would (in the tax year 2008-09) have been left out of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the amount of that capital payment is reduced to nil.

(2)If part of a capital payment would (in the tax year 2008-09) have been left out of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the amount of that capital payment is reduced by the amount of that part.

(3)If—

(a)chargeable gains were treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing in the tax year 2007-08 or any earlier tax year to a beneficiary,

(b)more than one capital payment that the beneficiary had received was taken into account for the purposes of determining the amount of chargeable gains treated as accruing to the beneficiary, and

(c)the amount of those chargeable gains was less than the total amount of capital payments taken into account,

for the purposes of this paragraph treat section 87(6) of TCGA 1992 as originally enacted as having effect in relation to earlier capital payments before later ones.

(4)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).

(5)References in this paragraph to chargeable gains include offshore income gains.

123Section 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.

124(1)This paragraph applies if—

(a)chargeable gains are treated under section 87 or 89(2) of TCGA 1992 as accruing 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 capital gains tax on the chargeable gains if and to the extent that they are treated as accruing 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 section 2(2) amount for the tax year 2007-08 or any earlier tax year.

125(1)This paragraph applies in relation to a settlement 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 the 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 sections 87 to 89 of TCGA 1992 as they apply in relation to the settlement for the relevant tax year, no account is to be taken of the capital payment.

126(1)The following provisions apply to a settlement if—

(a)section 87 applies to the settlement for the tax year 2008-09, and

(b)the trustees of the settlement have made an election under this sub-paragraph.

(2)An election under sub-paragraph (1) may only be made on or before the first 31 January to occur after the end of the first tax year (beginning with the tax year 2008-09) in which an event within either of the following paragraphs occurs—

(a)a capital payment is received (or treated as received) by a beneficiary of the settlement, and the beneficiary is resident in the United Kingdom in the tax year in which it is received, and

(b)the trustees transfer all or part of the settled property to the trustees of another settlement, and section 90 of TCGA 1992 applies in relation to the transfer.

(3)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.

(4)Paragraph 8A of that Schedule (relevant settlements) applies for the purposes of sub-paragraph (3) above.

(5)An election under sub-paragraph (1) is irrevocable.

(6)An election under that sub-paragraph must be made in the way and form specified by the Commissioners for Her Majesty’s Revenue and Customs.

(7)Sub-paragraph (8) applies if—

(a)by virtue of the matching of a capital payment with the section 2(2) amount for the settlement for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”), chargeable gains are treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to an individual in a tax year, and

(b)the individual is resident, but not domiciled, in the United Kingdom in that year.

(8)The individual is not charged to capital gains tax on so much of the chargeable gains as exceeds the relevant proportion of those gains.

(9)The relevant proportion is—

where—

  • A is what would be the section 2(2) amount for the settlement for the relevant tax year, if immediately before 6 April 2008 every relevant asset had been sold by the trustees (or the company concerned) and immediately re-acquired by them (or it) at the market value at that time, and

  • B is the section 2(2) amount for the settlement for the relevant tax year.

(10)For the purposes of sub-paragraph (9) an asset is a “relevant asset” if—

(a)by reason of the asset, a chargeable gain or allowable loss accrues to the trustees in the relevant tax year, and

(b)the asset has been comprised in the settlement from the beginning of 6 April 2008 until the time of the event giving rise to the chargeable gain or allowable loss.

(11)For those purposes, an asset is also a “relevant asset” if—

(a)by reason of the asset, chargeable gains are treated under section 13 of TCGA 1992 as accruing to the trustees in the relevant tax year,

(b)the company to which the chargeable gains actually accrue has owned the asset from the beginning of 6 April 2008 until the time of the event giving rise to those chargeable gains, and

(c)had the company disposed of the asset at any time in the relevant period, part of the chargeable gains (if any) accruing on the disposal would have been treated under section 13 of TCGA 1992 as accruing to the trustees.

(12)In sub-paragraph (11)(c) “the relevant period” means the period beginning at the beginning of 6 April 2008 and ending immediately before the event giving rise to the chargeable gains.

(13)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 (10)(b) or the conditions in sub-paragraph (11)(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.

(14)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 (11) (and this sub-paragraph) treat company B as having owned the asset throughout the period when company A owned it.

(15)If an asset is a relevant asset by virtue of sub-paragraph (14), for the purposes of sub-paragraph (9)—

(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.

(16)If—

(a)an asset would otherwise be a “relevant asset” within sub-paragraph (11), 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 (9) 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.

(17)“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 (12)).

(18)“The appropriate proportion” is the minimum proportion divided by the relevant proportion.

127(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 126(1),

(d)by virtue of the matching of a capital payment with the section 2(2) amount for the transferee settlement for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”), chargeable gains are treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to an individual in a tax year, and

(e)the individual is resident, but not domiciled, in the United Kingdom in that year.

(2)If the trustees of the transferee settlement have made an election under paragraph 126(1), paragraph 126(7) to (9) have effect in relation to the transferee settlement for that year as if the reference in paragraph 126(9) to relevant assets included relevant assets within the meaning of this paragraph.

(3)If the trustees of the transferee settlement have not made an election under paragraph 126(1), the individual is not charged to capital gains tax on so much of the chargeable gains mentioned in sub-paragraph (1)(d) above as exceeds the relevant proportion of those gains.

(4)The relevant proportion is—

where—

  • A is what would be the section 2(2) amount for the transferee settlement for the relevant tax year, if immediately before 6 April 2008 every relevant asset had been sold by the company concerned and immediately re-acquired by it at the market value at that time, and

  • B is the section 2(2) amount for the transferee settlement for the relevant tax year.

(5)For the purposes of this paragraph an asset is a “relevant asset” if—

(a)by reason of the asset, chargeable gains are treated under section 13 of TCGA 1992 as accruing to the trustees of the transferee settlement in the relevant tax year,

(b)the company to which the chargeable gains actually accrue has owned the asset from the beginning of 6 April 2008 until the time of the event giving rise to those chargeable gains,

(c)had the company disposed of the asset at any time in the relevant period, part of the chargeable gains (if any) accruing on the disposal would have been treated under section 13 of TCGA 1992 as accruing to—

(i)the trustees of the transferor settlement (if the disposal had been made before the transfer), or

(ii)the trustees of the transferee settlement (if it had not).

(6)In sub-paragraph (5)(c) “the relevant period” means the period beginning at the beginning of 6 April 2008 and ending immediately before the event giving rise to the chargeable gains.

(7)Sub-paragraphs (13) to (18) of paragraph 126 apply for the purposes of this paragraph (with such modifications as are necessary) as they apply for the purposes of that paragraph.

Attribution of gains to beneficiaries: cases involving transfers of value

128TCGA 1992 is amended as follows.

129(1)Section 85A (transfers of value: attribution of gains to beneficiaries and treatment of losses) is amended as follows.

(2)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).

(3)For subsection (3) substitute—

(3)When calculating the section 2(2) amount for a settlement for a tax year (within the meaning of section 87), no account is to be taken of any chargeable gains or allowable losses accruing by virtue of Schedule 4B.

Nothing in this subsection affects any increase in a section 2(2) amount by virtue of paragraph 1(3A) or 7B(2)(b) of Schedule 4C.

130In paragraph 3 of Schedule 4B (transfers of value by trustees linked with trustee borrowing: settlements), for sub-paragraph (4) substitute—

(4)A settlement is “within section 87” for a tax year if—

(a)section 87 applies to the settlement for that year, or

(b)chargeable gains would be treated under section 89(2) as accruing in that year to a beneficiary who received a capital payment from the trustees of the settlement in that year.

(5)The reference in subsection (4)(b) to chargeable gains treated as accruing includes offshore income gains treated as arising.

131Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.

132In paragraph 1, for sub-paragraphs (2) and (3) substitute—

(2)The transferor settlement is regarded for the purposes of this Schedule as having a “Schedule 4C pool”.

(3)The Schedule 4C pool contains the section 2(2) amounts for the settlement that are outstanding at the end of the tax year in which the original transfer is made (see paragraph 1A).

(3A)The section 2(2) amount for that tax year is increased by—

(a)the amount of Schedule 4B trust gains accruing by virtue of the original transfer (see paragraphs 3 to 7), and

(b)the total amount of any further Schedule 4B trust gains accruing by virtue of any further transfers of value to which that Schedule applies that are made by the trustees in that tax year.

133After that paragraph insert—

Outstanding section 2(2) amounts

1A(1)The following steps are to be taken for the purpose of calculating the section 2(2) amounts for a settlement that are outstanding at the end of a tax year (“the relevant tax year”).

  • Step 1

    Find the section 2(2) amount for the settlement for the relevant tax year and earlier tax years, as reduced under section 87A as it applies for the relevant tax year and earlier tax years.

  • Step 2

    This Step applies if, by virtue of the matching of the section 2(2) amount for the settlement for a tax year (“the applicable year”) with a capital payment, chargeable gains are treated under section 87 or 89(2) as accruing in the relevant tax year to a beneficiary who is not chargeable to tax for that year.

    Increase the section 2(2) amount for the applicable year (found under Step 1) by the amount of the chargeable gains.

(2)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.

(3)For the purposes of this Schedule a beneficiary is “chargeable to tax” for a tax year if the beneficiary is resident or ordinarily resident in the United Kingdom in that year.

134In 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)”.

135In 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)”.

136Omit paragraph 7A (and the heading before it).

137For paragraph 7B substitute—

7B(1)This paragraph applies if the trustees of the transferor settlement make a further transfer of value to which Schedule 4B applies in a tax year (“the year of the transfer”) after the tax year mentioned in paragraph 1(3).

(2)If the settlement has a Schedule 4C pool at the beginning of the year of the transfer—

(a)the section 2(2) amounts in the Schedule 4C pool are increased by the section 2(2) amounts for the settlement that are outstanding at the end of the year of the transfer, and

(b)the section 2(2) amount in the pool for the year of transfer is increased (or further increased) by the amount of Schedule 4B trust gains accruing by virtue of the further transfer.

(3)If the settlement does not have a Schedule 4C pool at the beginning of the year of the transfer, this Schedule applies in relation to the further transfer as it applied in relation to the original transfer.

(4)For the purposes of this paragraph a settlement has a Schedule 4C pool until the end of the tax year in which all section 2(2) amounts in the pool have been reduced to nil.

138For paragraph 8 substitute—

8(1)Chargeable gains are treated as accruing in a tax year (“the relevant tax year”) to a beneficiary who has received a capital payment from the trustees of a relevant settlement in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount in the Schedule 4C pool for the relevant tax year or any earlier tax year.

(2)The amount of chargeable gains treated as accruing is equal to—

(a)the amount of the capital payment, or

(b)if only part of the capital payment is matched, the amount of that part.

(3)Section 87A applies for a tax year for the purposes of matching capital payments received from the trustees of a relevant settlement with section 2(2) amounts in the Schedule 4C pool as if—

(a)references to section 2(2) amounts were to section 2(2) amounts in the Schedule 4C pool,

(b)references to a capital payment received from the trustees by a beneficiary were to a capital payment received from the trustees of a relevant settlement by a beneficiary who is chargeable to tax for that year, and

(c)for section 87A(3)(b) there were substituted—

(b)all section 2(2) amounts in the Schedule 4C pool have been reduced to nil.

(4)Section 87A applies for a tax year by virtue of this paragraph before it applies for that year otherwise than by virtue of this paragraph; 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.

139After paragraph 8A insert—

Attribution of gains: remittance basis

8AASection 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.

140Omit paragraphs 8B and 8C (including the heading before paragraph 8B).

141For 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).

142In 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).

143(1)Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended as follows.

(2)For sub-paragraphs (1) to (3) substitute—

(1)This paragraph applies if—

(a)by virtue of section 10A, an amount of chargeable gains within section 86(1)(e) that accrued in an intervening year to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the year of return, and

(b)after paragraph 8 has applied for the year of return, the section 2(2) amount for the intervening year that is in the Schedule 4C pool for the settlement is less than the amount mentioned in paragraph (a).

(2)The amount of chargeable gains treated as mentioned in sub-paragraph (1)(a) as accruing to the settlor in the year of return is limited to the section 2(2) amount referred to in sub-paragraph (1)(b).

144In paragraph 12A(3), for “87(4)” substitute “87(2)”.

145(1)Paragraph 13 (increase in tax payable under this Schedule) is amended as follows.

(2)For sub-paragraph (1) substitute—

(1)This paragraph applies if—

(a)chargeable gains are treated under paragraph 8 as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”), and

(b)the beneficiary is charged to tax by virtue of the matching.

(1A)Where part of a capital payment is matched, references in sub-paragraphs (2) and (3) to the capital payment are to the part matched.

(3)In sub-paragraph (5)(a), for the words from “year of assessment” to the end (excluding the “and”) substitute “tax year immediately after the relevant tax year,”.

146Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.

Attribution of gains to beneficiaries in cases involving transfers of value: commencement etc

147The amendments made by paragraphs 128 to 146 have effect in relation to transfers of value to which Schedule 4B to TCGA 1992 applies that are made on or after 6 April 2008.

148For 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.

149A capital payment received before 6 April 2008 is not within paragraph 9(4) of Schedule 4C to TCGA 1992 (if it otherwise would be).

150Paragraph 124 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.

151(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.

Attribution of gains to beneficiaries: existing Schedule 4C pools

152Schedule 4C to TCGA 1992 (as it has effect without the amendments made by paragraphs 128 to 146) applies for the tax year 2008-09 and subsequent tax years in relation to Schedule 4C pools created before 6 April 2008 (“existing Schedule 4C pools”) as if paragraphs 7B and 9(2) were omitted.

153Any 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).

154(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.

155In any tax year—

(a)Schedule 4C to TCGA 1992 (as amended by paragraphs 128 to 146) 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.

Transfers of securities: accrued income profits

156In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—

(a)omit the “and” at the end of paragraph (f), and

(b)at the end of paragraph (g) insert—

(h)section 670A of ITA 2007 (accrued income profits),.

157In section 617 of ITA 2007 (accrued income profits: income charged), after subsection (6) insert—

(7)Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis).

158Omit section 644 of that Act (accrued income profits: individuals to whom remittance basis applies).

159After section 670 of that Act insert—

Individuals to whom remittance basis applies
670AIndividuals to whom remittance basis applies

(1)This section applies if—

(a)accrued income profits are made by an individual as a result of a transfer of foreign securities, and

(b)section 809B, 809D or 809E (remittance basis) applies to the individual for the tax year in which the profits are made.

(2)Treat the accrued income profits as relevant foreign income of the individual.

(3)For the purposes of Chapter A1 of Part 14 (remittance basis)—

(a)if the individual is the transferor—

(i)treat any consideration for the transfer as deriving from the accrued income profits, and

(ii)if on the transfer the individual does not receive consideration of an amount equal to (or exceeding) the market value of the securities, treat the securities as deriving from the accrued income profits, and

(b)if the individual is the transferee, treat the securities as deriving from the accrued income profits.

(4)For the purposes of this section securities are “foreign” if income from them would be relevant foreign income.

160The amendments made by paragraphs 156 to 159 have effect in relation to transfers of securities where the settlement day is on or after 6 April 2008.

Transfers of assets abroad

161In 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”.

162In 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).

163ITA 2007 is amended as follows.

164In section 720(4) (transfer of assets abroad: charge where power to enjoy income), after “abroad)” insert “and section 726 (non-UK domiciled individuals to whom remittance basis applies)”.

165For section 726 substitute—

726Non-UK domiciled individuals to whom remittance basis applies

(1)This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if—

(a)section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(b)the individual is not domiciled in the United Kingdom in the year.

(2)For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual's.

(3)Treat the foreign deemed income as relevant foreign income of the individual.

(4)For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual’s as deriving from the foreign deemed income.

166In section 727 (transfer of assets abroad: charge where capital sums received), after subsection (3) insert—

(3A)But see section 730 (non-UK domiciled individuals to whom remittance basis applies).

167For section 730 substitute—

730Non-UK domiciled individuals to whom remittance basis applies

(1)This section applies in relation to income treated under section 728 as arising to an individual in a tax year (“the deemed income”) if—

(a)section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(b)the individual is not domiciled in the United Kingdom in the year.

(2)For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 728(1)(a) would be relevant foreign income if it were the individual's.

(3)Treat the foreign deemed income as relevant foreign income of the individual.

(4)For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 728(1)(a) as would be relevant foreign income if it were the individual’s as deriving from the foreign deemed income.

168In section 731 (transfer of assets abroad: charge where benefit received), after subsection (2) insert—

(2A)But see section 735 (non-UK domiciled individuals to whom remittance basis applies).

169For section 735 substitute—

735Non-UK domiciled individuals to whom remittance basis applies

(1)This section applies if—

(a)income is treated under section 732 as arising to an individual in a tax year (“the deemed income”),

(b)section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(c)the individual is not domiciled in the United Kingdom in the year.

(2)For the purposes of this section the deemed income is “foreign” if (and to the extent that) the relevant income to which it relates would be relevant foreign income if it were the individual's.

(3)Treat the foreign deemed income as relevant foreign income of the individual.

(4)For the purposes of Chapter A1 of Part 14 (remittance basis) treat relevant income, or a benefit, that relates to any part of the foreign deemed income as deriving from that part of the foreign deemed income.

735ASection 735: relevant income and benefits relating to foreign deemed income

(1)For the purposes of section 735—

(a)place the benefits mentioned in Step 1 in the order in which they were received by the individual (starting with the earliest benefit received),

(b)deduct from those benefits so much of any benefit within section 734(1)(b) as gives rise as mentioned in section 734(1)(d) to chargeable gains or offshore income gains,

(c)place the income mentioned in Step 3 for the tax years mentioned in Step 4 (“the relevant income”) in the order determined under subsection (3),

(d)deduct from that income any income that may not be taken into account because of section 743(1) or (2) (no duplication of charges),

(e)place the income treated under section 732(2) as arising to the individual in respect of the benefits in the order in which it is treated as arising (starting with the earliest income treated as having arisen), and

(f)treat the income mentioned in paragraph (e) as related to—

(i)the benefits, and

(ii)the relevant income,

by matching that income with the benefits and the relevant income (in the orders mentioned in paragraphs (a), (c) and (e)).

(2)In subsection (1) references to a step are to a step in section 733(1).

(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)For those purposes treat income for a period as arising immediately before the end of the period.

(6)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.

170The amendments made by paragraphs 161 to 169 have effect for the tax year 2008-09 and subsequent tax years.

General

171For the purposes of this Part of this Schedule, the market value of any asset is its market value for the purposes of TCGA 1992.

Section 26

SCHEDULE 8Rates of research and development relief and vaccine research relief

Rates of research and development relief: SMEs

1(1)Part 2 of Schedule 20 to FA 2000 (giving effect to R&D tax relief) is amended as follows.

(2)In each of the following provisions, for “150%” substitute “175%”—

(a)paragraph 13 (deduction in computing profits of trade),

(b)paragraph 14(2) (alternative treatment of pre-trading expenditure), and

(c)paragraph 15(3)(b) (entitlement to R&D tax credit).

(3)In paragraph 16(1)(a) (amount of R&D tax credit), for “16%” substitute “14%”.

(4)The amendments made by this paragraph have effect in relation to expenditure incurred on or after such day as the Treasury may by order appoint.

(5)The Treasury may appoint a day before the day on which this Act is passed, but not one before 1 April 2008.

Rates of research and development tax relief: large companies

2(1)In Schedule 12 to FA 2002 (tax relief for expenditure on research and development), in both of the following provisions, for “25%” substitute “30%”—

(a)paragraph 11(2) (deduction in computing profits of trade), and

(b)paragraph 15(4) (refunds of contributions to independent research and development etc).

(2)The amendments made by sub-paragraph (1) have effect in relation to expenditure incurred on or after 1 April 2008.

Rates of vaccine research relief

3(1)Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.

(2)In each of the following provisions, for “50%” substitute “40%”—

(a)paragraph 14(2) (deduction in computing profits of trade: small and medium-sized companies),

(b)paragraph 15(2)(a) (alternative treatment of pre-trading expenditure: deemed trading loss),

(c)paragraph 15A(2) (modifications for larger SMEs claiming R&D tax credits),

(d)paragraph 21(2) (deduction in computing profits of trade: large companies), and

(e)paragraph 25(4)(a)(i) and (b)(i) (refunds of contributions to independent research and development).

(3)In each of the following provisions, for “150%” substitute “140%”—

(a)paragraph 15(2)(b) (alternative treatment of pre-trading expenditure: deemed trading loss),

(b)paragraph 16A(1) (entitlement to tax credit: modifications for larger SMEs),

(c)paragraph 21(3) (deduction in computing profits of trade: large companies), and

(d)paragraph 25(4)(a)(ii) and (b)(ii) (refunds of contributions to independent research and development).

(4)The amendments made by this paragraph have effect in relation to expenditure incurred on or after such day as the Treasury may by order appoint.

(5)The Treasury may appoint a day before the day on which this Act is passed, but not one before 1 April 2008.

Section 28

SCHEDULE 9Companies in difficulty: SME R&D relief and vaccine research relief

Research and development relief

1(1)Schedule 20 to FA 2000 (tax relief for expenditure on research and development) is amended as follows.

(2)In paragraph 13 (deduction in computing profits of trade), insert at the end “(subject to paragraph 18A)”.

(3)In paragraph 14(2) (alternative treatment of pre-trading expenditure), insert at the end “(subject to paragraph 18A)”.

(4)In paragraph 15(1) (entitlement to R&D tax credit), insert at the end “(subject to paragraph 18A)”.

(5)In paragraph 18 (payment in respect of R&D tax credit), insert at the end—

(5)This paragraph has effect subject to paragraph 18A.

(6)After that paragraph insert—

R&D tax relief or tax credit only available where company is a going concern

18A(1)A company may only make—

(a)a claim under paragraph 13,

(b)an election under paragraph 14, or

(c)a claim under paragraph 15,

at a time when it is a going concern.

(2)If a company ceases to be a going concern after making a claim for an R&D tax credit under paragraph 15, it shall be treated as if it had not made the claim (and, accordingly, as if there had been no payment of R&D tax credit to carry interest under section 826 of the Taxes Act 1988).

(3)Sub-paragraph (2) does not apply to the extent that the claim relates to an amount that was paid or applied before the company ceased to be a going concern.

(4)For the purposes of this paragraph, a company is a going concern if—

(a)its latest published accounts were prepared on a going concern basis, and

(b)nothing in those accounts indicates that they were only prepared on that basis because of an expectation that the company would receive relief or tax credits under this Schedule or Schedule 13 to the Finance Act 2002.

(5)Section 436(2) of the Companies Act 2006 (meaning of “publication” of documents) has effect for the purposes of this paragraph.

Vaccine research relief

2(1)Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc) is amended as follows.

(2)In paragraph 14(1) (deduction in computing profits of trade), insert at the end “(subject to paragraph 18A)”.

(3)In paragraph 15(1) (alternative treatment of pre-trading expenditure: deemed trading loss), insert at the end “(subject to paragraph 18A)”.

(4)In paragraph 16(1) (entitlement to tax credit), insert at the end “(subject to paragraph 18A)”.

(5)In paragraph 18 (payment in respect of tax credit), insert at the end—

(5)This paragraph has effect subject to paragraph 18A.

(6)After that paragraph insert—

Relief or tax credit only available where company is a going concern

18A(1)A company may only make—

(a)a claim under paragraph 14,

(b)an election under paragraph 15, or

(c)a claim under paragraph 16,

at a time when it is a going concern.

(2)If a company ceases to be a going concern after making a claim for a tax credit under paragraph 16, it shall be treated as if it had not made the claim (and, accordingly, as if there had been no payment of tax credit to carry interest under section 826 of the Taxes Act 1988).

(3)Sub-paragraph (2) does not apply to the extent that the claim relates to an amount that was paid or applied before the company ceased to be a going concern.

(4)For the purposes of this paragraph, a company is a going concern if—

(a)its latest published accounts were prepared on a going concern basis, and

(b)nothing in those accounts indicates that they were only prepared on that basis because of an expectation that the company would receive relief or tax credits under this Schedule or Schedule 20 to the Finance Act 2000.

(5)Section 436(2) of the Companies Act 2006 (meaning of “publication” of documents) has effect for the purposes of this paragraph.

Commencement

3The amendments made by this Schedule have effect in relation to claims and elections made, and amounts paid or applied, on or after such day as the Treasury may by order appoint.

Section 29

SCHEDULE 10Cap on R&D aid

Part 1Calculation of total R&D aid

Calculation of total R&D aid

1For the purposes of section 29, “total R&D aid”, in respect of expenditure by a company (the “claimant”) attributable to a research and development project, is calculated as follows—

where—

  • A is total R&D aid,

  • TC is the tax credits (see paragraph 2),

  • R is the actual reduction in tax liability (see paragraph 3),

  • P is the potential relief (see paragraph 4),

  • CT is the main rate of corporation tax at the time when the total R&D aid is calculated, and

  • N is the notional relief (see paragraph 5).

2(1)In paragraph 1 “the tax credits” means the aggregate of the tax credits that have been paid to the claimant under paragraph 18 of Schedule 20 to FA 2000 or paragraph 18 of Schedule 13 to FA 2002 in respect of expenditure attributable to the project.

(2)A tax credit that has been claimed but not paid or applied shall be treated for the purposes of sub-paragraph (1) as if it had been paid, unless the claimant has been informed by Her Majesty’s Revenue and Customs that the tax credit will not be paid or applied.

3In paragraph 1 “the actual reduction in tax liability” means the aggregate of—

(a)the amounts by which the liability of the claimant to pay corporation tax has been reduced in any accounting period in consequence of R&D relief in respect of expenditure attributable to the project, and

(b)the amounts by which the liability of any other company to pay corporation tax has been reduced in any accounting period in consequence of a surrender to the company by the claimant under section 402 of ICTA (surrender of relief between members of groups and consortia) of a loss arising in consequence of R&D relief in respect of expenditure attributable to the project.

4(1)In paragraph 1 “the potential relief” means the aggregate amount of any R&D relief (other than a tax credit)—

(a)in respect of which the claimant has made a claim or election, but

(b)which, as at the day on which the total R&D aid is calculated, has not been brought into account by the claimant or by any other company.

(2)R&D relief shall not be counted for the purposes of sub-paragraph (1) if the claimant has been informed by Her Majesty’s Revenue and Customs that it is not entitled to the relief.

5(1)In paragraph 1 “the notional relief” is the aggregate amount of relief that the claimant could have claimed under Schedule 12 to FA 2002 (tax relief for expenditure on R&D: large companies etc) in any accounting period in respect of qualifying R&D expenditure attributable to the project if it had been a large company throughout the accounting period.

(2)In this paragraph—

  • “large company” has the meaning given in paragraph 2 of Schedule 12 to FA 2002, and

  • “qualifying R&D expenditure” means expenditure that, in the accounting period in question, was—

    (a)

    qualifying R&D expenditure within the meaning of Schedule 20 to FA 2000, or

    (b)

    qualifying expenditure within the meaning of Schedule 13 to FA 2002.

Interpretation

6In this Schedule “R&D relief” means any relief or tax credit under—

(a)Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on research and development), or

(b)Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc).

Transitional provision

7For the purpose of any calculation in accordance with paragraph 1, no account shall be taken of any R&D relief in respect of expenditure incurred before the day on which this Schedule comes into force.

Part 2Consequential amendments

8In Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on research and development), in paragraph 1 (entitlement), insert at the end—

(5)This paragraph has effect subject to section 29 of the Finance Act 2008 (cap on R&D aid).

9In Schedule 12 to FA 2002 (tax relief for expenditure on research and development)—

(a)after paragraph 10B insert—

Capped SME expenditure

10CFor the purposes of this Schedule, the SME’s “capped SME expenditure” is any expenditure—

(a)in respect of which the company is not entitled to relief under Schedule 20 to the Finance Act 2000 by reason only of section 29 of the Finance Act 2008 (cap on R&D aid), and

(b)which satisfies paragraph 10B(a) and (c).,

(b)in paragraph 11(3)(c), insert at the end “and capped SME expenditure (see paragraph 10C)”, and

(c)in paragraph 15(1)(d), insert at the end “or capped SME expenditure”.

10In Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc), in paragraph 1 (entitlement), insert at the end—

(3)This paragraph has effect subject to section 29 of the Finance Act 2008 (cap on R&D aid).

Section 32

SCHEDULE 11Venture capital schemes

Corporate Venturing Scheme

1Part 3 of Schedule 15 to FA 2000 (CVS: the issuing company) is amended as follows.

2In paragraph 26 (excluded activities)—

(a)in sub-paragraph (1), after paragraph (h) insert—

(ha)shipbuilding;

(hb)producing coal;

(hc)producing steel;, and

(b)in sub-paragraph (2), after the entry relating to paragraph 30 insert—

  • paragraph 30A (shipbuilding);

  • paragraph 30B (producing coal);

  • paragraph 30C (producing steel);.

3After paragraph 30 insert—

Excluded activities: shipbuilding

30AIn paragraph 26(1)(ha) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.

Excluded activities: producing coal

30B(1)This paragraph supplements paragraph 26(1)(hb).

(2)“Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).

(3)The production of coal includes the extraction of it.

Excluded activities: producing steel

30CIn paragraph 26(1)(hc) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.

Enterprise Investment Scheme

4Chapter 4 of Part 5 of ITA 2007 (EIS: the issuing company) is amended as follows.

5In section 192 (meaning of “excluded activities”)—

(a)in subsection (1), after paragraph (i) insert—

(ia)shipbuilding,

(ib)producing coal,

(ic)producing steel,, and

(b)in subsection (2), after paragraph (d) insert—

(da)section 196A (shipbuilding),

(db)section 196B (producing coal),

(dc)section 196C (producing steel),.

6After section 196 insert—

196AExcluded activities: shipbuilding

In section 192(1)(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.

196BExcluded activities: producing coal

(1)This section supplements section 192(1)(ib).

(2)“Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).

(3)The production of coal includes the extraction of it.

196CExcluded activities: producing steel

In section 192(1)(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.

Venture capital trusts

7Chapter 4 of Part 6 of ITA 2007 (VCTs: qualifying holdings) is amended as follows.

8In section 303 (meaning of “excluded activities”)—

(a)in subsection (1), after paragraph (i) insert—

(ia)shipbuilding,

(ib)producing coal,

(ic)producing steel,, and

(b)in subsection (2), after paragraph (d) insert—

(da)section 307A (shipbuilding),

(db)section 307B (producing coal),

(dc)section 307C (producing steel),.

9After section 307 insert—

307AExcluded activities: shipbuilding

In section 303(1)(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.

307BExcluded activities: producing coal

(1)This section supplements section 303(1)(ib).

(2)“Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).

(3)The production of coal includes the extraction of it.

307CExcluded activities: producing steel

In section 303(1)(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.

Commencement

10The amendments made by this Schedule are treated as having come into force on 6 April 2008.

11But the amendments made by paragraphs 2, 3, 5 and 6 do not have effect in relation to shares issued before that date.

12And the amendments made by paragraphs 8 and 9 do not have effect in relation to—

(a)a relevant holding issued before that date, or

(b)a relevant holding acquired by a company (“the investing company”) by means of the investment of protected money.

13For the purposes of paragraph 12(b) “protected money” is—

(a)money raised by the issue before that date of shares in or securities of the investing company, or

(b)money derived from the investment of such money.

Section 34

SCHEDULE 12Tax credit for certain foreign distributions

Part 1The tax credit

1Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies etc) is amended as follows.

2In the heading of the Chapter, for “etc.”, in the second place, substitute “and tax credits etc. in respect of certain distributions”.

3In the heading of section 397, after “distributions” insert “of UK resident companies”.

4After section 397 insert—

397ATax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents

(1)This section applies where a UK resident or eligible non-UK resident receives a relevant distribution made by a non-UK resident company, provided that—

(a)the company is not an offshore fund (within the meaning of section 756A of ICTA), and

(b)the person is a minority shareholder in the company at the time the distribution is received.

(2)The person is entitled to a tax credit equal to one-ninth of the amount or value of the grossed up distribution (but see subsections (3) and (6)).

(3)Subsection (2) only applies so far as the distribution is brought into charge to tax, and accordingly if the person’s total income is reduced by any deductions which fall to be made from the distribution, the tax credit for the distribution is reduced in the same proportion as the distribution.

(4)The person may claim to deduct the tax credit from the income tax charged on the person’s total income for the tax year in which the distribution (or the part of the distribution to which the tax credit relates) is brought into charge to tax.

(5)If a distribution is, or is treated under any provision of the Tax Acts as, the income of a person (“P”) other than the recipient (“R”), P (not R) is treated as receiving it for the purposes of this section (and so P (not R) is entitled to a tax credit if P falls within subsection (1)).

(6)This section is subject to the following provisions—

  • section 171(2B) of FA 1993 (no tax credit for distributions in respect of assets in Lloyd’s member’s premium trust fund),

  • section 504(4) of ITA 2007 (disapplication of certain provisions for income of unauthorised unit trusts),

  • section 592 of ITA 2007 (no tax credits for borrower under stock lending arrangement),

  • section 593 of ITA 2007 (no tax credits for interim holder under repo), and

  • section 594 of ITA 2007 (no tax credits for original owner under repo).

(7)In this section—

  • “eligible non-UK resident”, in relation to a distribution, means an individual who, at any time in the tax year in which the distribution (or the part of the distribution to which the tax credit relates) is brought into charge to tax, is a non-UK resident who meets the condition in section 56(3) of ITA 2007 (residence etc of claimants),

  • “grossed up distribution” means the distribution increased by the amount of any tax chargeable in respect of the distribution directly or by deduction under the laws of the territory in which the company is resident, including special withholding tax,

  • “minority shareholder”, in relation to a company, has the meaning given in section 397C,

  • “relevant distribution”, in relation to a person, means—

    (a)

    a qualifying distribution arising in a relevant tax year,

    (b)

    a cash dividend paid over to the person under paragraph 68(4) of Schedule 2 of ITEPA 2003 (cash dividend paid over if not reinvested etc) in a relevant tax year, and

    (c)

    a dividend treated under section 407 as paid to the person in a relevant tax year,

  • “relevant tax year” means the tax year 2008-09 or a subsequent tax year, and

  • “special withholding tax” has the meaning given in section 107(3) of FA 2004.

(8)Section 397B makes provision about the application of this section in the case of overseas dividends arising from manufactured overseas dividends (within the meaning of Chapter 2 of Part 11 of ITA 2007).

397BTax credits under section 397A: manufactured overseas dividends

(1)This section applies where, under section 581 of ITA 2007, a person is treated as receiving an overseas dividend by virtue of having received a manufactured overseas dividend which is representative of an overseas dividend.

(2)For the purposes of section 397A, the person is treated as receiving a relevant distribution made by a non-UK resident company that is not an offshore fund if, and only if, the manufactured overseas dividend is representative of such a distribution.

(3)References in section 397A to the grossed up distribution have effect as if they were references to the gross amount of the overseas dividend of which the manufactured overseas dividend is representative, disregarding the amount of any overseas tax credit.

(4)In this section—

  • “gross amount”, in relation to a manufactured overseas dividend, has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments) (see section 589 of that Act),

  • “manufactured overseas dividend” and “overseas tax credit” have the same meaning as in Chapter 2 of that Part (see sections 581 and 591 of that Act), and

  • “overseas dividend” has the same meaning as in that Part (see section 567 of that Act).

397CMeaning of “minority shareholder”

(1)In section 397A “minority shareholder”, in relation to a non-UK resident company, means a person whose shareholding in the company is less than 10% of the company’s issued share capital.

(2)Subsections (3) to (6) make provision about the circumstances in which shares form part of a person’s shareholding in a company for the purposes of this section.

(3)Shares form part of a person’s shareholding in a company to the extent that the person is beneficially entitled to the shares or to a distribution arising in respect of the shares (or both).

(4)Shares form part of a person’s shareholding in the company where—

(a)a person is a settlor in relation to a settlement, and

(b)income arising from shares comprised in the settlement is treated for income tax purposes as the income of that person and of that person alone.

(5)Shares form part of the shareholding in a company of a person (“P”) if—

(a)they form part of the shareholding in the company of a person connected with P,

(b)P transferred the shares to the connected person or arranged for the connected person to acquire the shares, and

(c)the purpose of the transfer or arrangement was wholly or mainly to enable P to avoid tax.

(6)Shares form part of a person’s shareholding in a company if that person has transferred the shares to another person under a repo or stock lending arrangement.

(7)In this section—

  • “repo” has the same meaning as in Part 11 of ITA 2007 (see section 569 of that Act),

  • “settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of this Act, and

  • “stock lending arrangement” has the same meaning as in Part 11 of ITA 2007 (see section 568 of that Act).

5In section 398(1) (increase in amount or value of dividends where tax credit available)—

(a)after “a tax credit” insert “under section 397 or 397A”, and

(b)for “section 397(1)” substitute “sections 397(1) and 397A(2)”.

6In section 399(1) (qualifying distributions received by persons not entitled to tax credits), after “a tax credit” insert “under section 397 or 397A”.

Part 2Consequential provision

TMA 1970

7TMA 1970 is amended as follows.

8In section 8(1AA)(b) (personal return: amount payable by way of income tax), after “397(1)” insert “or 397A(2)”.

9In section 8A(1AA)(b) (trustee’s return: amount payable by way of income tax), after “397(1)” insert “or 397A(2)”.

10In section 9(1)(b) (self-assessment of amount payable by way of income tax), after “397(1)” insert “or 397A(2)”.

11In section 12AA(1A)(b) (partnership return: amount payable by way of income tax), after “397(1)” insert “or 397A(2)”.

12In section 12AB(5) (partnership statement), in the definition of “tax credit”, after “397(1)” insert “or 397A(2)”.

13In section 59A(8)(b) (payments on account of income tax), after “397(1)” insert “or 397A(2)”.

14In section 59B(2)(b) (payment of income tax), after “397(1)” insert “or 397A(2)”.

ICTA

15In section 824(4A)(b) of ICTA (repayment supplements: individuals and others), after “397(1)” insert “or 397A(2)”.

FA 1993

16In section 171(2B) of FA 1993 (Lloyd’s underwriters etc: taxation of profits and allowance of losses), for “Section 397(1)” substitute “Sections 397(1) and 397A(2)”.

ITTOIA 2005

17ITTOIA 2005 is amended as follows.

18In section 403(1) (dividends from non-UK resident companies: income charged), omit “full”.

19In section 406 (dividends of non-UK resident companies: later charge where cash dividends retained in SIPs are paid over), after subsection (4) insert—

(4A)For the purposes of determining—

(a)whether the participant is entitled to a tax credit under section 397A in respect of a cash dividend so charged, and

(b)the amount of that tax credit,

that section applies as it has effect for the tax year in which the cash dividend is paid over.

20In section 407 (dividends of non-UK resident companies: dividend payment when dividend shares cease to be subject to SIP), after subsection (4) insert—

(4A)For the purposes of determining—

(a)whether the participant is entitled to a tax credit under section 397A in respect of a dividend so charged, and

(b)the amount of that tax credit,

that section applies as it has effect for the tax year in which the shares cease to be subject to the plan.

21In section 408 (reduction in tax due in cases within section 407), after subsection (2) insert—

(2A)In subsection (2) “the tax due” means the amount of tax due as a result of section 407 after deduction of the tax credit determined in accordance with section 407(4A).

22In section 688(1) (income not otherwise charged), omit “full”.

ITA 2007

23ITA 2007 is amended as follows.

24In section 425(5) (gift aid: deductions when calculating total amount of income tax to which individual charged for a tax year)—

(a)in paragraph (a), omit “and” at the end of sub-paragraph (v), and

(b)insert at the end , and

(c)the amount of any tax credit under section 397A of ITTOIA 2005 (tax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents).

25In section 504(4)(b) (provisions that do not apply to income of unauthorised unit trusts), for “section 397(1)” substitute “sections 397(1) and 397A(2)”.

26(1)Section 567 (meaning of “overseas securities” etc) is amended as follows.

(2)After subsection (1) insert—

(1A)“Overseas shares” means shares in a non-UK resident company.

(3)After subsection (2) insert—

(2A)“Overseas securities” includes overseas shares.

(4)Accordingly, in the heading, after “of” insert ““overseas shares”,”.

27(1)Section 592 (no tax credits for borrower under stock lending arrangement) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), insert at the end “or overseas shares,”,

(b)in paragraph (c), omit “UK”, and

(c)in paragraph (d)—

(i)after “manufactured dividend” insert “or manufactured overseas dividend”, and

(ii)after “UK shares” insert “or overseas shares”.

(3)In subsection (2), after “397(1)” insert “or 397A(2)”.

28(1)Section 593 (no tax credits for interim holder under repo) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), after “UK shares” insert “or overseas shares”,

(b)in paragraphs (b) and (d), omit “UK”, and

(c)in paragraph (e)—

(i)after “manufactured dividend” insert “or manufactured overseas dividend”, and

(ii)after “UK shares” insert “or overseas shares”.

(3)In subsection (2), after “397(1)” insert “or 397A(2)”.

29(1)Section 594 (no tax credits for original owner under repo) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), after “UK shares” insert “or overseas shares”,

(b)in paragraph (b), omit “UK”,

(c)in paragraph (d)—

(i)after “manufactured dividend” insert “or manufactured overseas dividend”, and

(ii)omit “UK”, and

(d)in paragraph (e), after “manufactured dividend” insert “or manufactured overseas dividend”.

(3)In subsection (2), after “397(1)” insert “or 397A(2)”.

30(1)Section 595 (meaning of “manufactured dividend”) is amended as follows.

(2)For “has” substitute “and “manufactured overseas dividend” have”.

(3)For “section 573(1)(a)” substitute “sections 573(1)(a) and 581(1)(a)”.

31In section 989 (definitions), in the definition of “tax credit”, after “397(1)” insert “or 397A(2)”.

Section 36

SCHEDULE 13Company gains from investment life insurance contracts

Definitions

1(1)In this Schedule—

  • “investment life insurance contract” means—

    (a)

    a policy of life insurance which has, or is capable of acquiring, a surrender value,

    (b)

    a contract for a purchased life annuity, or

    (c)

    a capital redemption policy,

    other than a relevant excluded contract,

  • “relevant company” means a company which is not a life insurance company, and

  • “relevant excluded contract” means—

    (a)

    an investment life insurance contract under, or purchased with sums or assets held for the purposes of, a registered pension scheme, or

    (b)

    (subject to sub-paragraph (3)) a policy of life insurance issued in respect of an insurance made before 14 March 1989.

(2)In sub-paragraph (1)—

  • “capital redemption policy” means a contract made in the course of capital redemption business (as defined in section 431(2ZF) of ICTA),

  • “life insurance company” means—

    (a)

    an insurance company (as defined in subsection (2) of section 431 of ICTA) which carries on long-term business (as defined in that subsection), or

    (b)

    a friendly society which would be such an insurance company but for the words “(other than a friendly society)” in the definition of “insurance company” in that subsection, and

  • “purchased life annuity” means an annuity—

    (a)

    granted for consideration in money or money’s worth in the ordinary course of a business of granting annuities on human life, and

    (b)

    payable for a term ending at a time ascertainable only by reference to the end of a human life (whether or not it may in some circumstances end before or after the life).

(3)A policy of life insurance issued in respect of an insurance made before 14 March 1989 is to be treated for the purposes of this Schedule as issued in respect of one made on or after that date if it is varied on or after that date so as to—

(a)increase the benefits secured, or

(b)extend the term of the insurance;

and any exercise of rights conferred by the policy is to be regarded for this purpose as a variation.

(4)In this Schedule—

  • “fair value accounting” has the same meaning as in Chapter 2 of Part 4 of FA 1996 (see section 103(1) of that Act),

  • “non-trading credit” has the same meaning as in that Chapter (see section 82(3) of that Act),

  • “registered pension scheme” has the same meaning as in Part 4 of FA 2004, and

  • “related transaction” has the same meaning as in Chapter 2 of Part 4 of FA 1996 (see section 84(5) and (6) of that Act).

Contract to be loan relationship

2(1)If a relevant company is a party to an investment life insurance contract, for the purposes of Chapter 2 of Part 4 of FA 1996 the contract is, in relation to the company, a loan relationship of the company (as a creditor relationship).

(2)But if—

(a)the amount or value of a lump sum payable under an investment life insurance contract by reason of death or the onset of critical illness, exceeds

(b)the surrender value of the contract immediately before the time when the lump sum becomes payable,

the excess is not to be brought into account as a credit under that Chapter representing a profit from a related transaction arising by reason of the lump sum becoming payable.

Increased non-trading credits

3(1)This paragraph applies where—

(a)by virtue of paragraph 2 the relevant company is required to bring into account for an accounting period a non-trading credit representing a profit from a related transaction, and

(b)the investment life insurance contract is a BLAGAB contract, or a contract which is subject to a relevant comparable EEA tax charge.

(2)The non-trading credit (“NTC”) is to be treated as increased by the relevant amount and the relevant amount is to be set off against corporation tax assessable on the company for the accounting period.

(3)The relevant amount is—

where AR is the appropriate rate for the accounting period, that is—

(a)

if a single rate of tax under section 88(1) of FA 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the accounting period, that rate, and

(b)

if more than one such rate of tax is applicable in relation to the accounting period, the average of those rates over the accounting period.

(4)In sub-paragraph (1) “BLAGAB contract” means a contract forming part of basic life assurance and general annuity business of an insurance company but not part of business which is exempt from corporation tax under section 460 of ICTA (friendly society business and former friendly society business).

(5)For the purposes of sub-paragraph (1) the contract is subject to a relevant comparable EEA tax charge if the contract forms part of the business of a company (other than the relevant company) to which a relevant comparable EEA tax charge has applied.

(6)For the purposes of sub-paragraph (5) a relevant comparable EEA tax charge has applied to a company if—

(a)a charge to tax has applied to the company under the laws of a territory outside the United Kingdom that is within the European Economic Area,

(b)the charge has applied to the company—

(i)as a body deriving its status as a company from those laws,

(ii)as a company with its place of management there, or

(iii)as a company falling under those laws to be regarded for any other reason as resident or domiciled there,

(c)