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Finance Act 2012

Section 220 Schedule 37: International Military Headquarters, Eu Forces, Etc

Summary

1.Section 220 and Schedule 37 provide the tax treatment required by the EU Status of Forces Agreement for visiting EU military and civilian staff, in order to enable the UK to ratify the agreement.  This treatment is in line with the tax treatment already given to visiting North Atlantic Treaty Organisation (NATO) forces and their civilian staff.  The Schedule amends the provisions of the four taxes acts that apply to visiting forces and allied headquarters.

Details of the Schedule

2.Paragraph 1 amends section 74A of the Finance Act (FA) 1960 so that the section applies an exemption from Stamp Duty Land Tax (SDLT) not just to land transactions in respect of a NATO  headquarters, but also to land transactions in respect of any international military headquarters designated under an Order in Council.  It also deletes the redundant subparagraph 4(c).

3.Paragraphs 2 and 3 amend sections 6 and 155 of the Inheritance Tax Act 1984 so that an exemption from inheritance tax applies not only to NATO military and civilian personnel stationed in the UK or attached to a NATO headquarters in the UK, but also to EU military and civilian staff attached to an international military headquarters designated under an Order in Council.

4.Paragraph 3(3) inserts into section 155:

  • new subsection 5A which provides that the official earnings of EU civilian staff, who are not British citizens, paid by a government of a Member State, and any movable property they have in the UK solely because they are part of the EU civilian staff, are excluded property and thus not chargeable to inheritance tax in the event of their death.

  • new subsection 5B which provides that EU civilian staff are not regarded for the purposes of the Inheritance Tax Act as becoming resident in the UK if their presence in the UK is solely because of being part of the EU civilian staff.

5.Paragraph 3(4) inserts new paragraphs (a) and (b) into subsection 6 of section 155 to define what is meant by EU civilian staff, this covers both staff working with EU forces in the UK and those attached to international military headquarters situated in the UK.

6.Paragraph 4 amends section 303 of the Income Tax (Earnings and Pensions) Act 2003 so that the section also applies to EU military and civilian staff, as well as to military and civilian personnel working for NATO countries.

7.Paragraph 4(3) inserts new subsection 4A into section 303 which provides that the earnings of EU civilian staff paid by a government of a Member State are exempt from income tax.  This exemption does not apply to British citizens and certain other classes of British nationals.

8.Paragraph 4(4) defines what is meant by EU civilian staff and covers both staff working with EU forces in the UK and those attached to international military headquarters.

9.Paragraph 5 amends section 833 of the Income Tax Act 2007 (ITA) so that the section applies to EU military and civilian staff, as well as to military and civilian staff working for NATO countries.

10.Paragraph 5(2) expands the type of headquarters covered from just NATO ones to any international military headquarters designated by Order in Council.

11.Paragraph 5(5) inserts new subsection 3A into section 303 ITA which brings EU civilian staff who are not British citizens, or certain other classes of British nationals, within the provision.

12.Paragraph 5(6) defines what is meant by EU civilian staff, and covers both staff working with EU forces in the UK and those attached to international military headquarters.

Background Note

13.In 2003 the European Council decided, in pursuit of the Common Foreign and Security Policy, to give the EU the capabilities required to take and implement decisions on the full range of conflict prevention and crisis management tasks defined in the Treaty on European Union (TEU).

14.In order to facilitate the movement of forces between Member States of the European Union in the context of the TEU, an Agreement was drawn up regarding the status of military and civilian staff.  This is the EU Status of Forces Agreement.  The Agreement was presented to Parliament in March 2009.

15.Although most of the Agreement is not to do with tax, it does provide for tax privileges to be granted to EU military and civilian staff of one Member State, who are present in another Member State to carry out tasks relating to common security and defence policy in accordance with the EU Status of Forces Agreement.

16.The UK cannot ratify the Agreement until all the domestic legislation is in place to give effect to its provisions.

17.Existing tax legislation provides that members of visiting forces and staff of designated NATO allied headquarters, who are present in the UK solely because of their official duties, are exempt from tax on their official remuneration and do not become tax resident in the UK if they are stationed here.  There are also provisions providing exemptions from Capital Gains Tax, Inheritance Tax and Stamp Duty Land Tax.

18.This section and schedule expand the existing legislation so that it will also apply to members of visiting EU forces and to the civilian staff which may accompany them, as well as to EU military and civilian staff working at designated international military headquarters in the United Kingdom.

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