Finance Act 2006

Just and reasonable apportionment in certain cases

5 (1) After section 741C insert—

“741D Section 739: just and reasonable apportionment in certain cases

(1) This section applies where—

(a) an individual is liable to tax by virtue of section 739 for a year of assessment (the “taxable year”), but

(b) the conditions in subsections (2) to (4) below are met.

(2) Condition 1 is that since the making of the transfer there have been one or more years of assessment when the circumstances were such that, so far as relating to such of the relevant transactions as were effected before the end of the year, the individual—

(a) was not liable to tax by virtue of section 739, or

(b) would not have been liable to tax by virtue of section 739 if there had been any deemed income of his under that section,

because an appropriate exemption applied or, in a case falling within paragraph (b) above, would have applied.

(3) Condition 2 is that the individual is liable to tax under section 739 in the taxable year in consequence of Condition B in section 741A(3) not being met.

(4) Condition 3 is that the income by reference to which the individual is liable to tax for the taxable year is attributable—

(a) partly to relevant transactions by reference to which the appropriate exemption applied for the last exempt year of assessment, and

(b) partly to associated operations not falling within paragraph (a) above (“chargeable operations”).

(5) For the purposes of this section, a year of assessment is “exempt” if it is one of the years of assessment mentioned in subsection (2) and there is no earlier year of assessment for which—

(a) the individual was liable to tax by virtue of section 739, or

(b) the individual would have been liable to tax by virtue of section 739, if there had been any deemed income of his under that section.

(6) Where this section applies, the liability of the individual is to be reduced as if it fell to be determined by reference to only so much of the income as appears to an officer of the Board to be justly and reasonably attributable to chargeable operations in all the circumstances of the case.

(7) The facts and matters that may be taken into account in determining for the purposes of subsection (6) above whether income may be regarded as justly and reasonably attributable to chargeable operations include whether, and to what extent, the chargeable operations or any of them directly or indirectly affect any of the following—

(a) the character, description or amount of any income of any person,

(b) any person’s power to enjoy any income,

(c) the character, description or amount of any income which a person has power to enjoy.

(8) The jurisdiction of the Special Commissioners on any appeal includes jurisdiction to review any decision taken by an officer of the Board in exercise of the officer’s functions under this section.

(9) In this section—

• “appropriate exemption” means exemption by virtue of—

  (a)

  paragraph (b) of section 741(1), or

  (b)

  Condition B in section 741A(3);

• “relevant transactions” means—

  (a)

  the transfer, and

  (b)

  any associated operations.”.

(2) The amendment made by this paragraph shall be taken to have come into force on 5th December 2005.