Finance Act 2012

PART 3 The future: income tax and capital gains tax

Taxes affected

13 The taxes affected by this Part are—

(a) income tax, and

(b) capital gains tax.

Application of this Part

14 (1) This Part applies if—

(a) a sum is levied under Article 19 on an amount of income or a gain of a person, and

(b) a certificate is issued to the person under Article 30(1) in respect of the levying of that sum (or sums that include that sum).

(2) This Part also applies if—

(a) a retention is made under EUSA from an amount of income or a gain of a person,

(b) a tax finality payment, as contemplated by the Joint Declaration, is made on the same income or gain, and

(c) a certificate is issued to the person under the Joint Declaration in respect of the making of that payment (or payments that include that payment).

(3) In this Part—

(a) the person is referred to as “P”,

(b) the certificate is referred to as “the relevant certificate”,

(c) the amount of income, or the gain, is referred to as “the cleared amount”,

(d) the account or deposit (within the meaning of the Agreement) to which the certificate relates (or to which certificates relate that include the certificate) is referred to as “the underlying account”, and

(e) the sum levied under Article 19 on the cleared amount or, as the case may be, the tax finality payment made on it is referred to as “the transferred sum”.

Effect of relevant certificate

15 (1) The effect of the relevant certificate depends on whether P makes an election under paragraph 16 in respect of the underlying account for the applicable year.

(2) “The applicable year” is the tax year for which P is liable to income tax or, as the case may be, capital gains tax on the cleared amount.

(3) If P makes an election, the transferred sum is to be treated as if it were a credit allowable against the income tax or, as the case may be, capital gains tax due from P for the applicable year.

(4) If P does not make an election, P ceases to be liable to income tax or, as the case may be, capital gains tax on the cleared amount.

(5) Sub-paragraph (4) is to be read in accordance with paragraph 7.

(6) Where P ceases to be liable to tax on the cleared amount, P also ceases to be liable to any ancillary charge directly connected with that amount.

Election

16 (1) P may make an election under this paragraph in respect of the underlying account for a tax year if all the affected amounts are included in full in a return (or amended return) made by P under Part 2 of TMA 1970 for that tax year.

(2) In relation to a tax year, an amount is an “affected amount” if—

(a) a certificate is issued to P under Article 30(1) or the Joint Declaration in respect of the levying of a sum, or the making of a tax finality payment, on that amount,

(b) the account or deposit to which the certificate relates is the underlying account, and

(c) the amount is required to be brought into account in assessing the income tax or capital gains tax due from P for that tax year.

(3) An election under this paragraph must be made in the return or amended return in which the affected amounts are included.

(4) An election may only be made under this paragraph if it is accompanied by all the relevant certificates relating to the underlying account.

(5) For the purposes of paragraph 15, P is treated as making an election under this paragraph in respect of the underlying account for a tax year if a claim is made under Part 3 of TIOPA 2010 (double taxation relief for special withholding tax) in relation to any of the affected amounts.

(6) Section 143 of TIOPA 2010 (taking account of special withholding tax in calculating income or gains) applies with any necessary modifications in relation to a tax finality payment as it applies in relation to special withholding tax.

Other credits to be allowed first

17 Other than a credit allowed under Part 3 of TIOPA 2010, any credit for foreign tax allowed under that Act against the income tax or, as the case may be, capital gains tax due from P for the applicable year is to be allowed before effect is given to paragraph 15(3).

Repayments

18 (1) Sub-paragraph (2) applies if the amount of a credit allowable under paragraph 15(3) exceeds the amount of income tax or, as the case may be, capital gains tax due from P for the applicable year (before set-off).

(2) The excess is to be set against any amount of the other tax (income tax or capital gains tax) due from P for that year.

(3) Nothing in this Part entitles any person to a repayment or refund of tax, save for any repayment to which P may be entitled as a result of paragraph 15(3) if, in relation to a credit allowable under that paragraph, there is any remaining balance after applying—

(a) sub-paragraph (2), and

(b) section 138(4)(a) or 140(5)(a) of TIOPA 2010, if applicable to the cleared amount.

Relationship with special withholding tax rules

19 The Joint Declaration does not count for the purposes of section 136(6)(b) of TIOPA 2010 (definition of “special withholding tax”) as a corresponding provision of international arrangements.