Taxation of Chargeable Gains Act 1992

13 Attribution of gains to members of non-resident companies. U.K.

(1) This section applies as respects chargeable gains accruing to a company—

(a) which is not resident in the United Kingdom, and

(b) which would be a close company if it were resident in the United Kingdom.

(2) Subject to this section, every person who at the time when the chargeable gain accrues to the company is resident or ordinarily resident in the United Kingdom, who, if an individual, is domiciled in the United Kingdom, and who [F1 is a participator] in the company, shall be treated for the purposes of this Act as if a part of the chargeable gain had accrued to him.

[F2 (3) That part shall be equal to the proportion of the gain that corresponds to the extent of the participator’s interest as a participator in the company.

(4) Subsection (2) above shall not apply in the case of any participator in the company to which the gain accrues where the aggregate amount falling under that subsection to be apportioned to him and to persons connected with him does not exceed [F3 one tenth] of the gain.]

(5) This section shall not apply in relation to—

F4 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F5 (b) a chargeable gain accruing on the disposal of an asset used, and used only—

(i) for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

(ii) for the purposes of the part carried on outside the United Kingdom of a trade carried on by the company partly within and partly outside the United Kingdom,]

(c) a chargeable gain accruing on the disposal of currency or of a debt within section 252(1), where the currency or debt is or represents money in use for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

(d) to a chargeable gain in respect of which the company is chargeable to tax by virtue of section [F6 10B].

[F7 (5A) Where—

(a) an amount of tax is paid by a person in pursuance of subsection (2) above, and

(b) an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) before the end of the period specified in subsection (5B) below,

the amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax, capital gains tax or corporation tax in respect of the distribution.

(5B) The period referred to in subsection (5A)(b) above is the period of three years from—

(a) the end of the period of account of the company in which the chargeable gain accrued, or

(b) the end of the period of twelve months beginning with the date on which the chargeable gain accrued,

whichever is earlier.

F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

F9 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) The amount of capital gains tax paid by a person in pursuance of subsection (2) above (so far as [F10 neither reimbursed by the company nor applied under subsection (5A) above for reducing any liability to tax)] shall be allowable as a deduction in the computation under this Act of a gain accruing on the disposal by him of [F11 any asset representing his interest as a participator in the company].

[F12 (7A) In ascertaining for the purposes of subsection (5A) or (7) above the amount of capital gains tax or income tax chargeable on any person for any year on or in respect of any chargeable gain or distribution—

(a) any such distribution as is mentioned in subsection (5A)(b) above and falls to be treated as income of that person for that year shall be regarded as forming the highest part of the income on which he is chargeable to tax for the year;

(b) any gain accruing in that year on the disposal by that person of any asset representing his interest as a participator in the company shall be regarded as forming the highest part of the gains on which he is chargeable to tax for that year;

(c) where any such distribution as is mentioned in subsection (5A)(b) above falls to be treated as a disposal on which a gain accrues on which that person is so chargeable, that gain shall be regarded as forming the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (b) above; and

(d) any gain treated as accruing to that person in that year by virtue of subsection (2) above shall be regarded as the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (c) above.]

(8) So far as it would go to reduce or extinguish chargeable gains accruing by virtue of this section to a person in a year of assessment this section shall apply in relation to a loss accruing to the company on the disposal of an asset in that year of assessment as it would apply if a gain instead of a loss had accrued to the company on the disposal, but shall only so apply in relation to that person; and subject to the preceding provisions of this subsection this section shall not apply in relation to a loss accruing to the company.

(9) If [F13 a person who is a participator in the company] at the time when the chargeable gain accrues to the company is itself a company which is not resident in the United Kingdom but which would be a close company if it were resident in the United Kingdom, an amount equal to the amount apportioned under subsection (3) above out of the chargeable gain [F14 to the participating company’s interest as a participator in the company to which the gain accrues shall be further apportioned among the participators in the participating company according to the extent of their respective interests as participators, and subsection (2) above shall apply to them accordingly in relation to the amounts further apportioned, and so on through any number of companies].

(10) The persons treated by this section as if a part of a chargeable gain accruing to a company had accrued to them shall include trustees [F15 who are participators in the company, or in any company amongst the participators in which the gain is apportioned under subsection (9) above,] if when the gain accrues to the company the trustees are neither resident nor ordinarily resident in the United Kingdom.

[F16 (10A) A gain which is treated as accruing to any person by virtue of this section shall not be eligible for taper relief.]

[F17 (10B) A chargeable gain that would be treated as accruing to a person under subsection (2) above shall not be so treated if—

(a) it would be so treated only if assets that are assets of a pension scheme were taken into account in ascertaining that person’s interest as a participator in the company, and

(b) at the time the gain accrues a gain arising on a disposal of those assets would be exempt from tax by virtue of [F18 section 271(1)(c) or (1A)].

In paragraph (a) above “assets of a pension scheme” means assets held for the purposes of a fund or scheme to which any of the provisions mentioned in paragraph (b) above applies.]

(11) If any tax payable by any person by virtue of subsection (2) above is paid by the company to which the chargeable gain accrues, or in a case under subsection (9) above is paid by any such other company, the amount so paid shall not for the purposes of income tax, capital gains tax or corporation tax be regarded as a payment to the person by whom the tax was originally payable.

[F19 (11A) For the purposes of this section the amount of the gain or loss accruing at any time to a company that is not resident in the United Kingdom shall be computed (where it is not the case) as if that company were within the charge to corporation tax on capital gains.]

[F20 (12) In this section “participator”, in relation to a company, has the meaning given by section 417(1) of the Taxes Act for the purposes of Part XI of that Act (close companies).

(13) In this section—

(a) references to a person’s interest as a participator in a company are references to the interest in the company which is represented by all the factors by reference to which he falls to be treated as such a participator; and

(b) references to the extent of such an interest are references to the proportion of the interests as participators of all the participators in the company (including any who are not resident or ordinarily resident in the United Kingdom) which on a just and reasonable apportionment is represented by that interest.

(14) For the purposes of this section, where—

(a) the interest of any person in a company is wholly or partly represented by an interest which he has under any settlement (“his beneficial interest”), and

(b) his beneficial interest is the factor, or one of the factors, by reference to which that person would be treated (apart from this subsection) as having an interest as a participator in that company,

the interest as a participator in that company which would be that person’s shall be deemed, to the extent that it is represented by his beneficial interest, to be an interest of the trustees of the settlement (and not of that person), and references in this section, in relation to a company, to a participator shall be construed accordingly.

(15) Any appeal under section 31 of the Management Act involving any question as to the extent for the purposes of this section of a person’s interest as a participator in a company shall be to the Special Commissioners.]

Textual Amendments

F1 Words in s. 13(2) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(2)

F2 S. 13(3)(4) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(3)

F3 Words in s. 13(4) substituted (with application in accordance with s. 80(6) of the amending Act) by Finance Act 2001 (c. 9), s. 80(2) (with Sch. 3)

F4 S. 13(5)(a) repealed (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(4), Sch. 41 Pt. V(30)

F5 S. 13(5)(b) substituted (with application in accordance with s. 80(6) of the amending Act) by Finance Act 2001 (c. 9), s. 80(3) (with Sch. 3)

F6 Word in s. 13(5)(d) substituted (with effect in accordance with s. 155(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 27 para. 2(3)

F7 S. 13(5A)(5B) substituted for s. 13(5A) (with application in accordance with s. 80(6) of the amending Act) by Finance Act 2001 (c. 9), s. 80(4) (with Sch. 3)

F8 Words in s. 13(5B) repealed (24.7.2002) by Finance Act 2002 (c. 23), Sch. 40 Pt. 3(16)

F9 S. 13(6) repealed (with effect in accordance with Sch. 41 Pt. 5(30) of the amending Act) by Finance Act 1996 (c. 8), Sch. 41 Pt. V(30)

F10 Words in s. 13(7) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(5)(a)

F11 Words in s. 13(7) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(5)(b)

F12 S. 13(7A) inserted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(6)

F13 Words in s. 13(9) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(7)(a)

F14 Words in s. 13(9) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(7)(b)

F15 Words in s. 13(10) substituted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(8)

F16 S. 13(10A) inserted (with effect in accordance with s. 121(4) of the amending Act) by Finance Act 1998 (c. 36), Sch. 21 para. 4

F17 S. 13(10B) inserted (with application in accordance with s. 80(6) of the amending Act) by Finance Act 2001 (c. 9), s. 80(5) (with Sch. 3)

F18 Words in s. 13(10B)(b) substituted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 35 para. 39 (with Sch. 36)

F19 S. 13(11A) inserted (with effect in accordance with s. 122(6)(7) of the amending Act) by Finance Act 1998 (c. 36), s. 122(4)

F20 S. 13(12)-(15) inserted (with effect in accordance with s. 174(11) of the amending Act) by Finance Act 1996 (c. 8), s. 174(9)