Finance Act 2012

PART 3 U.K. Sales of exempt property

Relief from deemed remittance rule U.K.

18 U.K. After section 809Y of ITA 2007 (property that ceases to be exempt property treated as remitted) insert—

“809YA Exception to section 809Y: proceeds taken offshore or invested

(1) Section 809Y(1) does not apply to property if—

(a) it ceases to be exempt property because the whole of it is sold whilst it is in the United Kingdom, and

(b) conditions A to F are met.

(2) Condition A is that the sale is to a person other than a relevant person.

(3) Condition B is that the sale is by way of a bargain made at arm's length.

(4) Condition C is that, once the sale is completed, no relevant person—

(a) has any interest in the property,

(b) is able or entitled to benefit from the property by virtue of any interest, right or arrangement, or

(c) has any right (whether conditional or unconditional) to acquire any interest mentioned in paragraph (a) or ability or entitlement mentioned in paragraph (b).

(5) Condition D is that the whole of the disposal proceeds are released (whether in one go or in instalments) on or before the final deadline.

(6) “The final deadline” is the first anniversary of the 5 January following the tax year in which the property ceases to be exempt property (within the meaning of section 809Y).

(7) Condition E is that—

(a) the whole of the disposal proceeds are taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the proceeds are released, or

(b) if the disposal proceeds are paid in instalments, each instalment is taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the instalment is released.

(8) But if any of the disposal proceeds are released in the period of 45 days ending with the final deadline, Condition E is satisfied, as respects those proceeds, only if they are taken offshore or used by a relevant person to make a qualifying investment on or before the final deadline.

(9) Condition F is that, if Condition E is satisfied wholly or in part by using disposal proceeds to make a qualifying investment, the remittance basis user makes a claim for relief under section 809YC(2) on or before the first anniversary of the 31 January following the tax year in which the property is sold.

(10) For the purposes of this section, proceeds or instalments are “released” on the day on which they first become available for use by or for the benefit of any relevant person.

(11) This section does not apply if the sale is made as part of or as a result of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

809YB Condition E: supplementary

(1) An officer of Revenue and Customs may agree in a particular case to extend any period within which disposal proceeds (or instalments) must be taken offshore or used by a relevant person to make a qualifying investment in order to satisfy Condition E.

(2) The power to agree to an extension is exercisable only in exceptional circumstances and only if the remittance basis user requests such an extension.

809YC Effect of disapplying section 809Y

(1) This section has effect if section 809Y(1) does not apply to property by virtue of section 809YA.

(2) The income and gains treated under section 809X as not remitted to the United Kingdom continue to be treated after the sale as not remitted to the United Kingdom even though the property has ceased to be exempt property.

(3) But nothing in subsection (2) prevents anything done in relation to any part of the disposal proceeds after that part is taken offshore (or used to make a qualifying investment) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is done.

(4) Treat the disposal proceeds as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the amount of that kind of income or gain contained in the exempt property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X).

(5) Where Condition E was met by using the disposal proceeds to make a qualifying investment—

(a) the business investment provisions apply to the income and gains that continue, by virtue of subsection (2), to be treated as not remitted as they apply to income or gains that are treated under section 809VA(2) as not remitted, and

(b) if the investment was made using more than just the disposal proceeds, treat only the part of the investment made using the disposal proceeds as “the investment” for the purposes of those provisions.

809YD Chargeable gains accruing on sales of exempt property

(1) This section applies to an individual (“P”) if—

(a) a chargeable gain (but not a loss) accrues to a person on a sale of exempt property,

(b) but for section 809YA, section 809Y(1) would have applied to the property by virtue of the sale, and

(c) P is either—

(i) the person to whom the gain accrues, or

(ii) a person to whom a part of the gain is treated as accruing under section 13 of TCGA 1992 (members of non-resident companies).

(2) The relevant UK gain is to be treated for the purposes of this Chapter as if—

(a) it were a foreign chargeable gain of P, and

(b) in the case of section 809E, it were not part of P's UK income and gains.

(3) Accordingly, if section 809F applies to P for the applicable tax year and P is not domiciled in the United Kingdom in that year, the relevant UK gain is charged in accordance with section 12 of TCGA 1992 as if it were a foreign chargeable gain.

(4) The relevant UK gain is—

(a) in a case falling within subsection (1)(c)(i), the gain accruing to P,

(b) in a case falling within subsection (1)(c)(ii), the part of the gain treated as accruing to P.

(5) The applicable tax year is —

(a) if section 10A of TCGA 1992 (temporary non-residents) applies in P's case and the relevant UK gain is within subsection (2) of that section, the year of return as defined in that section,

(b) otherwise, the tax year in which the relevant UK gain accrues.

(6) In applying this Chapter to the relevant UK gain—

(a) treat the amount of any gains mentioned in section 809Q(4)(e) contained in the disposal proceeds by virtue of section 809YC(4) as increased by the amount of the relevant UK gain,

(b) disregard section 809U, and

(c) anything done in relation to any part of the disposal proceeds before the part is taken offshore or used to make a qualifying investment (or both) does not count as a remittance to the United Kingdom of any of the relevant UK gain.

(7) The relevant UK gain is to be treated for the purposes of the following provisions of TCGA 1992 as if it fell within the definition of foreign chargeable gains in section 12(4) of that Act—

(a) section 10A,

(b) section 12,

(c) section 14A, and

(d) sections 16ZB to 16ZD.

(8) This section has effect despite section 14A(2) of TCGA 1992.

(9) This section does not apply with respect to a chargeable gain if P gives notice to Her Majesty's Revenue and Customs under this subsection.

(10) A notice under subsection (9)—

(a) must be in writing and must identify the gain in question,

(b) must be given on or before the first anniversary of the 31 January following the applicable tax year, and

(c) may not be revoked after that first anniversary.”

Application of Part 3 U.K.

19 U.K. The amendment made by this Part of this Schedule has effect in relation to exempt property that is sold on or after 6 April 2012 (including property sold pursuant to a contract entered into before that date so long as the contract only becomes unconditional on or after that date).