Finance Act 2008

Part 2 U.K. Non-resident companies and trusts etc

Offshore income gains U.K.

F1 92 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 7 paras. 92-96 repealed (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), reg. 1(1), Sch. 2

F1 93 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 7 paras. 92-96 repealed (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), reg. 1(1), Sch. 2

F1 94 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 7 paras. 92-96 repealed (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), reg. 1(1), Sch. 2

F1 95 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 7 paras. 92-96 repealed (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), reg. 1(1), Sch. 2

F1 96 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 7 paras. 92-96 repealed (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), reg. 1(1), Sch. 2

97 U.K. In section 734 of ITA 2007 (reduction in amount charged: previous capital gains tax charge), after subsection (4) insert—

“(5) References in this section to chargeable gains treated as accruing to an individual include offshore income gains treated as arising to the individual (see section 762 of ICTA).”

Offshore income gains: commencement etc U.K.

98 U.K. The amendments made by paragraphs 92 to 97 have effect for the tax year 2008-09 and subsequent tax years.

99 U.K. Paragraphs 120 and 121 apply in relation to offshore income gains as if—

(a) references to section 2(2) amounts were to OIG amounts,

(b) references to chargeable gains were to offshore income gains, and

(c) Step 1 of paragraph 120(2) provided that OIG amounts are to be calculated in accordance with—

(i) section 762(2) of ICTA (the reference in the second sentence of that Step to section 87(4) of TCGA 1992 being read as a reference to section 762(2) of ICTA), or

(ii) section 87(5) of TCGA 1992 as applied by section 762(3) of ICTA.

100 (1) This paragraph applies if— U.K.

(a) by virtue of section 87 or 89(2) of, or Schedule 4C to, TCGA 1992 as applied by [F2 regulation 20 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)], income is treated under [F3 such regulations (regulation 17 of those Regulations] as arising to an individual in the tax year 2008-09 or any subsequent tax year, and

(b) the individual is not domiciled in the United Kingdom in that year.

(2) The individual is not charged to income tax on the income if and to the extent that it is treated as arising by reason of—

(a) a capital payment received (or treated as received) by the individual before 6 April 2008, or

(b) the matching of any capital payment with the OIG amount for the tax year 2007-08 or any earlier tax year.

Textual Amendments

F2 Words in Sch. 7 para. 100(1)(a) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(2)(a)

F3 Words in Sch. 7 para. 100(1)(a) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(2)(b)

101 (1) This paragraph applies if— U.K.

(a) the trustees of a settlement have made an election under paragraph 126(1) (re-basing election),

(b) income is treated under [F4 regulation 17 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)] as arising to an individual in the tax year 2008-09 or any subsequent tax year (“the relevant tax year”) by reason of the matching, under section 87A of TCGA 1992 as applied by [F5 regulation 20 of those Regulations], of an OIG amount with a capital payment received by the individual from the trustees, and

(c) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.

(2) The individual is not charged to income tax on so much of the income as exceeds the relevant proportion of that income.

(3) Sub-paragraphs (9) to (18) of paragraph 126 (meaning of “the relevant proportion”) apply for the purposes of sub-paragraph (2) above as if—

(a) references to section 2(2) amounts were to OIG amounts,

(b) references to chargeable gains were to offshore income gains,

(c) references to allowable losses were omitted, and

(d) references to anything accruing were to it arising (and similar references were read accordingly).

Textual Amendments

F4 Words in Sch. 7 para. 101(1)(b) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(3)(a)

F5 Words in Sch. 7 para. 101(1)(b) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(3)(b)

102 (1) This paragraph applies if— U.K.

(a) in the tax year 2008-09 or any subsequent tax year, the trustees of a settlement (“the transferor settlement”) transfer all or part of the settled property to the trustees of another settlement (“the transferee settlement”),

(b) section 90 of TCGA 1992 applies in relation to the transfer,

(c) the trustees of the transferor settlement have made an election under paragraph 126(1),

(d) by virtue of the matching (under section 87A of TCGA 1992 as applied by [F6 regulation 20 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)]) of a capital payment with an OIG amount of the transferee settlement, income is treated under [F7 such regulations (regulation 17 of those Regulations] as arising to an individual in a tax year (“the relevant tax year”), and

(e) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.

(2) If paragraph 101 applies in relation to the transferee settlement, paragraph 126(9) as applied by paragraph 101(3) has effect as if the reference there to relevant assets included relevant assets within the meaning of paragraph 127(4) (as modified by sub-paragraph (4)(b) below).

(3) If paragraph 101 does not apply in relation to the transferee settlement, the individual is not charged to income tax on so much of the income mentioned in sub-paragraph (1)(d) above as exceeds the relevant proportion of that income.

(4) Sub-paragraphs (4) to (7) of paragraph 127 (meaning of “the relevant proportion”) apply for the purposes of sub-paragraph (3) above as if—

(a) references section 2(2) amounts were to OIG amounts,

(b) references to chargeable gains were to offshore income gains, and

(c) references to anything accruing were to it arising.

Textual Amendments

F6 Words in Sch. 7 para. 102(1)(d) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(4)(a)

F7 Words in Sch. 7 para. 102(1)(d) substituted (with effect in accordance with reg. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 130(4)(b)

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

103 U.K. In section 13(2) of TCGA 1992 (attribution of gains to members of non-resident companies), for the words from “, who, if” to “and who” substitute “ and ”.

104 U.K. After section 14 of that Act insert—

“14A Section 13: non-UK domiciled individuals

(1) This section applies if—

(a) by virtue of section 13, part of a chargeable gain that accrues to a company on the disposal of an asset is treated as accruing to an individual in a tax year, and

(b) the individual is not domiciled in the United Kingdom in that year.

(2) The part of the chargeable gain treated as accruing to the individual (“the deemed chargeable gain”) is a foreign chargeable gain within the meaning of section 12 if (and only if) the asset is situated outside the United Kingdom.

(3) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—

(a) treat any consideration obtained by the company on the disposal of the asset as deriving from the deemed chargeable gain, and

(b) unless the consideration so obtained is of an amount equal to the market value of the asset, treat the asset as deriving from the deemed chargeable gain.

(4) If—

(a) the deemed chargeable gain is a foreign chargeable gain (within the meaning of section 12),

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year mentioned in subsection (1), and

(c) any of the deemed chargeable gain is remitted to the United Kingdom in a tax year after that year,

the chargeable gain treated under section 12(2) as accruing may not be reduced or extinguished under section 13(8).”

105 U.K. The amendments made by paragraphs 103 and 104 have effect in relation to chargeable gains accruing on or after 6 April 2008.

Attribution of gains to beneficiaries U.K.

106 U.K. TCGA 1992 is amended as follows.

107 U.K. In section 85(11) (disposal of interests in non-resident settlements), for the words from “there would” to the end substitute “ chargeable gains would be treated under section 89(2) or paragraph 8 of Schedule 4C as accruing in the following year of assessment to a beneficiary who received a capital payment from the trustees of the settlement in that year. ”

108 U.K. For section 87 substitute—

“87 Non-UK resident settlements: attribution of gains to beneficiaries

(1) This section applies to a settlement for a tax year (“the relevant tax year”) if the trustees are neither resident nor ordinarily resident in the United Kingdom in that year.

(2) Chargeable gains are treated as accruing in the relevant tax year to a beneficiary of the settlement who has received a capital payment from the trustees in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount for the relevant tax year or any earlier tax year.

(3) The amount of chargeable gains treated as accruing is equal to—

(a) the amount of the capital payment, or

(b) if only part of the capital payment is matched, the amount of that part.

(4) The section 2(2) amount for a settlement for a tax year for which this section applies to the settlement is—

(a) the amount upon which the trustees of the settlement would be chargeable to tax under section 2(2) for that year if they were resident and ordinarily resident in the United Kingdom in that year, or

(b) if section 86 applies to the settlement for that year, the amount mentioned in paragraph (a) minus the total amount of chargeable gains treated under that section as accruing in that year.

(5) The section 2(2) amount for a settlement for a tax year for which this section does not apply to the settlement is nil.

(6) For the purposes of this section a settlement arising under a will or intestacy is treated as made by the testator or intestate at the time of death.

87A Section 87: matching

(1) This section supplements section 87.

(2) The following steps are to be taken for the purposes of matching capital payments with section 2(2) amounts.

Step 1

Find the section 2(2) amount for the relevant tax year.

Step 2

Find the total amount of capital payments received by the beneficiaries from the trustees in the relevant tax year.

Step 3

The section 2(2) amount for the relevant tax year is matched with—

(a) if the total amount of capital payments received in the relevant tax year does not exceed the section 2(2) amount for the relevant tax year, each capital payment so received, and

(b) otherwise, the relevant proportion of each of those capital payments.

“The relevant proportion” is the section 2(2) amount for the relevant tax year divided by the total amount of capital payments received in the relevant tax year.

Step 4

If paragraph (a) of Step 3 applies—

(a) reduce the section 2(2) amount for the relevant tax year by the total amount of capital payments referred to there, and

(b) reduce the amount of those capital payments to nil.

If paragraph (b) of that Step applies—

(a) reduce the section 2(2) amount for the relevant tax year to nil, and

(b) reduce the amount of each of the capital payments referred to there by the relevant proportion of that capital payment.

Step 5

Start again at Step 1 (unless subsection (3) applies).

If the section 2(2) amount for the relevant tax year (as reduced under Step 4) is not nil, read references to capital payments received in the relevant tax year as references to capital payments received in the latest tax year which—

(a) is before the last tax year for which Steps 1 to 4 have been undertaken, and

(b) is a tax year in which capital payments (the amounts of which have not been reduced to nil) were received by beneficiaries.

If the section 2(2) amount for the relevant tax year (as so reduced) is nil, read references to the section 2(2) amount for the relevant tax year as the section 2(2) amount for the latest tax year—

(a) which is before the last tax year for which Steps 1 to 4 have been undertaken, and

(b) for which the section 2(2) amount is not nil.

(3) This subsection applies if—

(a) all of the capital payments received by beneficiaries from the trustees in the relevant tax year or any earlier tax year have been reduced to nil, or

(b) the section 2(2) amounts for the relevant tax year and all earlier tax years have been reduced to nil.

(4) The effect of any reduction under Step 4 of subsection (2) is to be taken into account in any subsequent application of this section.

87B Section 87: remittance basis

(1) This section applies if—

(a) chargeable gains are treated under section 87 as accruing to an individual in a tax year,

(b) section 809B, 809D or 809E (remittance basis) applies to the individual for that year, and

(c) the individual is not domiciled in the United Kingdom in that year.

(2) The chargeable gains are foreign chargeable gains within the meaning of section 12 (non-UK domiciled beneficiaries to whom remittance basis applies).

(3) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis) treat relevant property or benefits as deriving from the chargeable gains.

(4) For the purposes of subsection (3) property or a benefit is “relevant” if the capital payment by reason of which the chargeable gains are treated as accruing consists of—

(a) the payment or transfer of the property or its becoming property to which section 60 applies, or

(b) the conferring of the benefit.

87C Sections 87 and 87A: disregard of certain capital payments

(1) For the purposes of sections 87 and 87A as they apply in relation to a settlement, no account is to be taken of a capital payment (or a part of a capital payment) within subsection (2).

(2) A capital payment is within this subsection if (and to the extent that) it is received (or treated as received) in a tax year from the trustees of the settlement by a company that—

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

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

(and is not treated under any of subsections (3) to (5) of section 96 as received by another person).”

109 (1) Section 88 (gains of dual resident settlements) is amended as follows. U.K.

(2) For subsection (2) substitute—

“(2) The section 2(2) amount for a tax year for which section 87 applies by virtue of this section is what it would be if the amount mentioned in section 87(4)(a) were the assumed chargeable amount.”

(3) Omit subsection (7).

110 (1) Section 89 (migrant settlements) is amended as follows. U.K.

(2) In subsection (1), for “section 87 if” substitute “ sections 87 and 87A if ”.

(3) For subsections (2) and (3) substitute—

“(1A) Subsection (2) applies to a settlement if—

(a) a non-resident period is succeeded by a resident period, and

(b) in relation to the last tax year in the non-resident period (“the last non-resident tax year”), section 87A(3) applied by virtue of paragraph (a) of that provision (exhaustion of capital payments).

(2) Chargeable gains are treated as accruing in a tax year (in the resident period) to a beneficiary of the settlement who receives a capital payment from the trustees in that year if all or part of the capital payment is matched (under section 87A as it applies for that year) with the section 2(2) amount for the last non-resident tax year or any earlier tax year.

(3) Section 87(3) and (4) and sections 87A to 87C apply for the purposes of subsection (2) as if the relevant tax year were the tax year mentioned in subsection (2).

(4) Section 87B (remittance basis) applies in relation to chargeable gains treated under subsection (2) as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.”

111 U.K. For section 90 substitute—

“90 Sections 87 and 89(2): transfers between settlements

(1) This section applies if the trustees of a settlement (“the transferor settlement”) transfer all or part of the settled property to the trustees of another settlement (“the transferee settlement”).

(2) In this section “the year of transfer” means the tax year in which the transfer occurs.

(3) Treat the section 2(2) amount for the transferee settlement for any tax year (not later than the year of transfer) as increased by—

(a) the section 2(2) amount for the transferor settlement for that year (as reduced under section 87A as it applies in relation to that settlement for the year of transfer and all earlier tax years), or

(b) if part only of the settled property is transferred, the relevant proportion of the amount mentioned in paragraph (a).

(4) “The relevant proportion”is—

(a) the market value of the property transferred, divided by

(b) the market value of the property comprised in the transferor settlement immediately before the transfer.

(5) Treat the section 2(2) amount for the transferor settlement for any tax year as reduced by the amount by which the section 2(2) amount for the transferee settlement for that year is increased under subsection (3).

(6) If neither section 87 nor section 89(2) would otherwise apply to the transferee settlement for the year of transfer—

(a) section 89(2) to (4) apply to the settlement for that year (and subsequent tax years), and

(b) for this purpose, references there to the last non-resident tax year are to be read as the year of transfer.

(7) The increase under subsection (3) has effect for the year of transfer and subsequent tax years.

(8) The reduction under subsection (5) has effect for tax years after the year of transfer.

(9) When calculating the market value of property for the purposes of this section or section 90A in a case where the property is subject to a debt, reduce the market value by the amount of the debt.

(10) This section does not apply to—

(a) a transfer to which Schedule 4B applies, or

(b) any section 2(2) amount that is in a Schedule 4C pool (see paragraph 1 of Schedule 4C).

90A Section 90: transfers made for consideration in money or money's worth

(1) Section 90 does not apply to a transfer of settled property made for consideration in money or money's worth if the amount (or value) of that consideration is equal to or exceeds the market value of the property transferred.

(2) The following provisions apply if—

(a) section 90 applies to a transfer of settled property made for consideration in money or money's worth, and

(b) the amount (or value) of that consideration is less than the market value of the property transferred.

(3) If the transfer is of all of the settled property, for the purposes of section 90 treat the transfer as being of part only of the settled property.

(4) Deduct the amount (or value) of the consideration from the amount of the market value referred to in section 90(4)(a).”

112 (1) Section 91 (increase in tax payable under section 87 or 89(2)) is amended as follows. U.K.

(2) For subsection (1) substitute—

“(1) This section applies if—

(a) chargeable gains are treated under section 87 or 89(2) as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”),

(b) the beneficiary is charged to tax by virtue of that matching, and

(c) the capital payment was made more than one year after the end of the relevant tax year.

(1A) Where part of a capital payment is matched, references in subsections (2) and (3) to the capital payment are to the part matched.”

(3) In subsection (5)(a), for the words from “year” to the end (excluding the “and”) substitute “ tax year immediately after the relevant tax year, ”.

(4) Omit subsection (8).

113 U.K. Omit sections 92 to 95 (matching).

114 U.K. Omit—

(a) in FA 1998, section 130(1) and (4), and paragraph 6(3) and (4) of Schedule 21,

(b) in FA 2002, paragraph 6 of Schedule 11,

(c) in FA 2003, section 163(3), and

(d) in FA 2006, paragraphs 34(2)(d) and 36(2)(a) of Schedule 12.

Attribution of gains to beneficiaries: commencement etc U.K.

115 U.K. The amendments made by paragraphs 106 to 114 have effect for the tax year 2008-09 and subsequent tax years.

116 U.K. For the purposes of sections 87 and 87A of TCGA 1992, no account is to be taken of—

(a) any capital payment received before 10 March 1981, or

(b) any capital payment received on or after that date but before 6 April 1984, so far as it represents a chargeable gain which accrued to the trustees before 6 April 1981.

117 U.K. In the application of section 87 of TCGA 1992 for a tax year by virtue of section 88, no account is to be taken of any capital payment received before 6 April 1991.

118 (1) This paragraph applies if— U.K.

(a) section 87 of TCGA 1992 applies to a settlement for the tax year 2008-09 or any subsequent tax year (“the tax year”),

(b) the settlement was made before 17 March 1998,

(c) none of the settlors fulfilled the residence requirements when the settlement was made, and

(d) none of the settlors fulfils the residence requirements in the tax year.

(2) For the purposes of that section as it applies to the settlement for the tax year, no account is to be taken of—

(a) any gains or losses accruing to the trustees of the settlement before 17 March 1998, or

(b) any capital payments received before that date.

(3) A settlor “fulfils the residence requirements” when the settlor is—

(a) resident or ordinarily resident in the United Kingdom, and

(b) domiciled in any part of the United Kingdom.

119 U.K. Section 87C of TCGA 1992 does not apply in relation to any capital payment received before 6 April 2008.

120 (1) This paragraph applies to a settlement if section 87 or 89(2) of TCGA 1992 applied to it for the tax year 2007-08 or any earlier tax year. U.K.

(2) The following steps are to be taken for the purposes of calculating the section 2(2) amount for the settlement for the tax year 2007-08 and earlier tax years.

Step 1

Calculate (in accordance with section 87 and, where appropriate, section 88) the section 2(2) amount for the settlement for the tax year 2007-08 and earlier tax years.

For this purpose, references in section 87(4) and (5) of TCGA 1992 (as substituted) to section 87 of that Act applying to a settlement for a tax year are to be read as references to section 87 of that Act (as it had effect before that substitution) applying to a settlement for a tax year.

Step 2

Find the total amount of chargeable gains treated under section 87 or 89(2) as accruing to beneficiaries of the settlement in the tax year 2007-08 or any earlier tax year (“the total deemed gains”).

Step 3

Find the earliest tax year for which the section 2(2) amount is not nil.

If the section 2(2) amount for that year is less than or equal to the total deemed gains, reduce that section 2(2) amount to nil.

Otherwise, reduce that section 2(2) amount by the amount of the total deemed gains.

Step 4

Reduce the total deemed gains by the amount by which the section 2(2) amount was reduced under Step 3.

Step 5

If the total deemed gains is not nil, start again at Step 3.

For this purpose, read references to the earliest tax year for which the section 2(2) amount is not nil as references to the earliest tax year—

(a) which is after the last tax year for which Steps 3 and 4 have been undertaken, and

(b) for which the section 2(2) amount is not nil.

(3) If, before 6 April 2008, the trustees of the settlement made a transfer of value to which Schedule 4B to TCGA 1992 applied, sub-paragraph (2) has effect subject to such modifications as are just and reasonable on account of Schedule 4C to that Act having applied in relation to the settlement.

(4) This paragraph does not apply if section 90 of TCGA 1992 applied to a transfer of settled property by or to the trustees of the settlement that was made before 6 April 2008 (see paragraph 121).

121 (1) If section 90 of TCGA 1992 (as originally enacted) applied to a transfer of settled property made before 6 April 2008, this paragraph applies in relation to the transferor settlement and the transferee settlement. U.K.

(2) In this paragraph “the year of transfer” means the tax year in which the transfer occurred.

(3) The following steps are to be taken for the purpose of calculating the section 2(2) amount for the transferor and transferee settlements for the tax year 2007-08 and earlier tax years.

Step 1

Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount (at the end of the year of transfer) for the transferor settlement for the year of transfer and earlier tax years.

For this purpose, read references there to the tax year 2007-08 as references to the year of transfer.

Step 2

Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount (before the year of transfer) for the transferee settlement for the tax year before the year of transfer and earlier tax years.

For this purpose, read references there to the tax year 2007-08 as references to the tax year before the year of transfer.

Step 3

Calculate the section 2(2) amount for the transferee settlement for the year of transfer.

Step 4

Treat the section 2(2) amount for the transferee settlement for the year of transfer or any earlier tax year (as calculated under Step 2 or 3) as increased by—

(a) the section 2(2) amount for the transferor settlement for that year (as calculated under Step 1), or

(b) if part only of the settled property was transferred, the relevant proportion of the amount mentioned in paragraph (a).

“The relevant proportion” here has the same meaning as in section 90(4) of TCGA 1992 (as substituted by this Schedule).

Step 5

Treat the section 2(2) amount for the transferor settlement for any tax year as reduced by the amount by which the section 2(2) amount for the transferee settlement for that year is increased under Step 4.

Step 6

Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount for the transferor settlement for the tax year 2007-08 and earlier tax years.

For this purpose—

(a) treat the section 2(2) amount for the year of transfer or any earlier tax year as the amount calculated by taking Steps 1 and 5 above, and

(b) reduce the total deemed gains by the amount of the total deemed gains calculated by taking Step 1 above.

Step 7

Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount for the transferee settlement for the tax year 2007-08 and earlier tax years.

For this purpose—

(a) treat the section 2(2) amount for the year of transfer or any earlier tax year as the amount calculated by taking Steps 2 to 4 above, and

(b) reduce the total deemed gains by the amount of the total deemed gains calculated by taking Step 2 above.

(4) This paragraph applies with any necessary modifications in relation to a settlement as respects which more than one relevant transfer was made.

(5) In sub-paragraph (4) “relevant transfer” means a transfer—

(a) made before 6 April 2008, and

(b) to which section 90 of TCGA 1992 applied.

(6) If, before 6 April 2008, the trustees of the transferor or transferee settlement made a transfer of value to which Schedule 4B to TCGA 1992 applied, this paragraph has effect subject to such modifications as are just and reasonable on account of Schedule 4C to that Act having applied in relation to the settlement.

122 (1) If all of a capital payment would (in the tax year 2008-09) have been left out of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the amount of that capital payment is reduced to nil. U.K.

(2) If part of a capital payment would (in the tax year 2008-09) have been left out of account by virtue of section 87(6) of TCGA 1992 as originally enacted, the amount of that capital payment is reduced by the amount of that part.

(3) If—

(a) chargeable gains were treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing in the tax year 2007-08 or any earlier tax year to a beneficiary,

(b) more than one capital payment that the beneficiary had received was taken into account for the purposes of determining the amount of chargeable gains treated as accruing to the beneficiary, and

(c) the amount of those chargeable gains was less than the total amount of capital payments taken into account,

for the purposes of this paragraph treat section 87(6) of TCGA 1992 as originally enacted as having effect in relation to earlier capital payments before later ones.

(4) References in this paragraph to section 87(6) of TCGA 1992 include that provision as it would (but for the amendments made by this Schedule) have applied by virtue of section 762(3) of ICTA (offshore income gains).

(5) References in this paragraph to chargeable gains include offshore income gains.

123 U.K. Section 89(2) of TCGA 1992 as substituted applies to a settlement for the tax year 2008-09 (and subsequent tax years) if section 89(2) of that Act as originally enacted would (but for the amendments made by this Schedule) have applied to the settlement for the tax year 2008-09.

124 (1) This paragraph applies if— U.K.

(a) chargeable gains are treated under section 87 or 89(2) of TCGA 1992 as accruing to an individual in the tax year 2008-09 or any subsequent tax year, and

(b) the individual is not domiciled in the United Kingdom in that year.

(2) The individual is not charged to capital gains tax on the chargeable gains if and to the extent that they are treated as accruing by reason of—

(a) a capital payment received (or treated as received) by the individual before 6 April 2008, or

(b) the matching of any capital payment with the section 2(2) amount for the tax year 2007-08 or any earlier tax year.

125 (1) This paragraph applies in relation to a settlement for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”) if— U.K.

(a) an individual who was resident or ordinarily resident, but not domiciled, in the United Kingdom in the tax year 2007-08 received a capital payment from the trustees of the settlement on or after 12 March 2008 but before 6 April 2008, and

(b) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.

(2) For the purposes of sections 87 to 89 of TCGA 1992 as they apply in relation to the settlement for the relevant tax year, no account is to be taken of the capital payment.

126 (1) The following provisions apply to a settlement if— U.K.

(a) section 87 applies to the settlement for the tax year 2008-09, and

(b) the trustees of the settlement have made an election under this sub-paragraph.

(2) An election under sub-paragraph (1) may only be made on or before the first 31 January to occur after the end of the first tax year (beginning with the tax year 2008-09) in which an event within either of the following paragraphs occurs—

(a) a capital payment is received (or treated as received) by a beneficiary of the settlement, and the beneficiary is resident in the United Kingdom in the tax year in which it is received, and

(b) the trustees transfer all or part of the settled property to the trustees of another settlement, and section 90 of TCGA 1992 applies in relation to the transfer.

(3) For a tax year as respects which the settlement has a Schedule 4C pool, the reference in sub-paragraph (2)(a) above to a capital payment received (or treated as received) by a beneficiary of the settlement is to be read as a capital payment received (or treated as received) by a beneficiary of a relevant settlement from the trustees of a relevant settlement.

(4) Paragraph 8A of that Schedule (relevant settlements) applies for the purposes of sub-paragraph (3) above.

(5) An election under sub-paragraph (1) is irrevocable.

(6) An election under that sub-paragraph must be made in the way and form specified by the Commissioners for Her Majesty's Revenue and Customs.

(7) Sub-paragraph (8) applies if—

(a) by virtue of the matching of a capital payment with the section 2(2) amount for the settlement for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”), chargeable gains are treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to an individual in a tax year, and

(b) the individual is resident, but not domiciled, in the United Kingdom in that year.

(8) The individual is not charged to capital gains tax on so much of the chargeable gains as exceeds the relevant proportion of those gains.

(9) The relevant proportion is—

where—

A is what would be the section 2(2) amount for the settlement for the relevant tax year, if immediately before 6 April 2008 every relevant asset had been sold by the trustees (or the company concerned) and immediately re-acquired by them (or it) at the market value at that time, and

B is the section 2(2) amount for the settlement for the relevant tax year.

(10) For the purposes of sub-paragraph (9) an asset is a “relevant asset” if—

(a) by reason of the asset, a chargeable gain or allowable loss accrues to the trustees in the relevant tax year, and

(b) the asset has been comprised in the settlement from the beginning of 6 April 2008 until the time of the event giving rise to the chargeable gain or allowable loss.

(11) For those purposes, an asset is also a “relevant asset” if—

(a) by reason of the asset, chargeable gains are treated under section 13 of TCGA 1992 as accruing to the trustees in the relevant tax year,

(b) the company to which the chargeable gains actually accrue has owned the asset from the beginning of 6 April 2008 until the time of the event giving rise to those chargeable gains, and

(c) had the company disposed of the asset at any time in the relevant period, part of the chargeable gains (if any) accruing on the disposal would have been treated under section 13 of TCGA 1992 as accruing to the trustees.

(12) In sub-paragraph (11)(c) “the relevant period” means the period beginning at the beginning of 6 April 2008 and ending immediately before the event giving rise to the chargeable gains.

(13) If—

(a) by reason of an asset which would not otherwise be a relevant asset (“the new asset”), chargeable gains or allowable losses accrue, or are treated under section 13 as accruing, to the trustees in the relevant tax year,

(b) the value of the new asset derives wholly or in part from another asset (“the original asset”), and

(c) section 43 of TCGA 1992 applies in relation to the calculation of the chargeable gains or allowable losses,

the new asset (or part of that asset) is a “relevant asset” if the condition in sub-paragraph (10)(b) or the conditions in sub-paragraph (11)(b) and (c) would be met were the references there to the asset to be read as references to the new asset or the original asset.

(14) If—

(a) on or after 6 April 2008, a company (“company A”) disposes of an asset to another company (“company B”), and

(b) section 171 of TCGA (transfers within groups) (as applied by section 14(2) of that Act) applies in relation to the disposal,

for the purposes of sub-paragraph (11) (and this sub-paragraph) treat company B as having owned the asset throughout the period when company A owned it.

(15) If an asset is a relevant asset by virtue of sub-paragraph (14), for the purposes of sub-paragraph (9)—

(a) treat the chargeable gains as having accrued to the company which owned the asset at the beginning of 6 April 2008, and

(b) treat the proportion of those chargeable gains attributable under section 13 of TCGA 1992 to the trustees as being the proportion of the chargeable gains actually accruing that are so attributable.

(16) If—

(a) an asset would otherwise be a “relevant asset” within sub-paragraph (11), and

(b) the proportion of chargeable gains treated under section 13 of TCGA 1992 as accruing to the trustees by reason of the asset (“the relevant proportion”) is greater than the minimum proportion,

for the purposes of sub-paragraph (9) treat the appropriate proportion of the asset as a relevant asset and the rest of the asset as if it were not a relevant asset.

(17) “The minimum proportion” is the smallest proportion of chargeable gains (if any) that would have been attributable to the trustees on a disposal of the asset at any time in the relevant period (as defined by sub-paragraph (12)).

(18) “The appropriate proportion” is the minimum proportion divided by the relevant proportion.

127 (1) This paragraph applies if— U.K.

(a) in the tax year 2008-09 or any subsequent tax year, the trustees of a settlement (“the transferor settlement”) transfer all or part of the settled property to the trustees of another settlement (“the transferee settlement”),

(b) section 90 of TCGA 1992 applies in relation to the transfer,

(c) the trustees of the transferor settlement have made an election under paragraph 126(1),

(d) by virtue of the matching of a capital payment with the section 2(2) amount for the transferee settlement for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”), chargeable gains are treated under section 87 or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to an individual in a tax year, and

(e) the individual is resident, but not domiciled, in the United Kingdom in that year.

(2) If the trustees of the transferee settlement have made an election under paragraph 126(1), paragraph 126(7) to (9) have effect in relation to the transferee settlement for that year as if the reference in paragraph 126(9) to relevant assets included relevant assets within the meaning of this paragraph.

(3) If the trustees of the transferee settlement have not made an election under paragraph 126(1), the individual is not charged to capital gains tax on so much of the chargeable gains mentioned in sub-paragraph (1)(d) above as exceeds the relevant proportion of those gains.

(4) The relevant proportion is—

where—

A is what would be the section 2(2) amount for the transferee settlement for the relevant tax year, if immediately before 6 April 2008 every relevant asset had been sold by the company concerned and immediately re-acquired by it at the market value at that time, and

B is the section 2(2) amount for the transferee settlement for the relevant tax year.

(5) For the purposes of this paragraph an asset is a “relevant asset” if—

(a) by reason of the asset, chargeable gains are treated under section 13 of TCGA 1992 as accruing to the trustees of the transferee settlement in the relevant tax year,

(b) the company to which the chargeable gains actually accrue has owned the asset from the beginning of 6 April 2008 until the time of the event giving rise to those chargeable gains,

(c) had the company disposed of the asset at any time in the relevant period, part of the chargeable gains (if any) accruing on the disposal would have been treated under section 13 of TCGA 1992 as accruing to—

(i) the trustees of the transferor settlement (if the disposal had been made before the transfer), or

(ii) the trustees of the transferee settlement (if it had not).

(6) In sub-paragraph (5)(c) “the relevant period” means the period beginning at the beginning of 6 April 2008 and ending immediately before the event giving rise to the chargeable gains.

(7) Sub-paragraphs (13) to (18) of paragraph 126 apply for the purposes of this paragraph (with such modifications as are necessary) as they apply for the purposes of that paragraph.

Attribution of gains to beneficiaries: cases involving transfers of value U.K.

128 U.K. TCGA 1992 is amended as follows.

129 (1) Section 85A (transfers of value: attribution of gains to beneficiaries and treatment of losses) is amended as follows. U.K.

(2) After subsection (2) insert—

“(2A) For the purposes of sections 87 to 89, no account is to be taken of any section 2(2) amount in a Schedule 4C pool (see paragraph 1 of Schedule 4C).”

(3) For subsection (3) substitute—

“(3) When calculating the section 2(2) amount for a settlement for a tax year (within the meaning of section 87), no account is to be taken of any chargeable gains or allowable losses accruing by virtue of Schedule 4B.

Nothing in this subsection affects any increase in a section 2(2) amount by virtue of paragraph 1(3A) or 7B(2)(b) of Schedule 4C.”

130 U.K. In paragraph 3 of Schedule 4B (transfers of value by trustees linked with trustee borrowing: settlements), for sub-paragraph (4) substitute—

“(4) A settlement is “within section 87” for a tax year if—

(a) section 87 applies to the settlement for that year, or

(b) chargeable gains would be treated under section 89(2) as accruing in that year to a beneficiary who received a capital payment from the trustees of the settlement in that year.

(5) The reference in subsection (4)(b) to chargeable gains treated as accruing includes offshore income gains treated as arising.”

131 U.K. Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.

132 U.K. In paragraph 1, for sub-paragraphs (2) and (3) substitute—

“(2) The transferor settlement is regarded for the purposes of this Schedule as having a “Schedule 4C pool”.

(3) The Schedule 4C pool contains the section 2(2) amounts for the settlement that are outstanding at the end of the tax year in which the original transfer is made (see paragraph 1A).

(3A) The section 2(2) amount for that tax year is increased by—

(a) the amount of Schedule 4B trust gains accruing by virtue of the original transfer (see paragraphs 3 to 7), and

(b) the total amount of any further Schedule 4B trust gains accruing by virtue of any further transfers of value to which that Schedule applies that are made by the trustees in that tax year.”

133 U.K. After that paragraph insert—

“Outstanding section 2(2) amounts U.K.

1A (1) The following steps are to be taken for the purpose of calculating the section 2(2) amounts for a settlement that are outstanding at the end of a tax year (“the relevant tax year”).

Step 1

Find the section 2(2) amount for the settlement for the relevant tax year and earlier tax years, as reduced under section 87A as it applies for the relevant tax year and earlier tax years.

Step 2

This Step applies if, by virtue of the matching of the section 2(2) amount for the settlement for a tax year (“the applicable year”) with a capital payment, chargeable gains are treated under section 87 or 89(2) as accruing in the relevant tax year to a beneficiary who is not chargeable to tax for that year.

Increase the section 2(2) amount for the applicable year (found under Step 1) by the amount of the chargeable gains.

(2) For the purposes of Step 1 of sub-paragraph (1) take into account the effect of section 90 in relation to any transfer of settled property from or to the trustees of the settlement made in or before the relevant tax year.

(3) For the purposes of this Schedule a beneficiary is “chargeable to tax” for a tax year if the beneficiary is resident or ordinarily resident in the United Kingdom in that year.”

134 U.K. In paragraph 4(2) (chargeable amount: non-resident settlement), at the end insert “ (and had made the disposals which Schedule 4B treats them as having made) ”.

135 U.K. In paragraph 5(2)(a) (chargeable amount: dual resident settlement), after “apply” insert “ (and the disposals which Schedule 4B treats them as having made were made) ”.

136 U.K. Omit paragraph 7A (and the heading before it).

137 U.K. For paragraph 7B substitute—

“7B (1) This paragraph applies if the trustees of the transferor settlement make a further transfer of value to which Schedule 4B applies in a tax year (“the year of the transfer”) after the tax year mentioned in paragraph 1(3).

(2) If the settlement has a Schedule 4C pool at the beginning of the year of the transfer—

(a) the section 2(2) amounts in the Schedule 4C pool are increased by the section 2(2) amounts for the settlement that are outstanding at the end of the year of the transfer, and

(b) the section 2(2) amount in the pool for the year of transfer is increased (or further increased) by the amount of Schedule 4B trust gains accruing by virtue of the further transfer.

(3) If the settlement does not have a Schedule 4C pool at the beginning of the year of the transfer, this Schedule applies in relation to the further transfer as it applied in relation to the original transfer.

(4) For the purposes of this paragraph a settlement has a Schedule 4C pool until the end of the tax year in which all section 2(2) amounts in the pool have been reduced to nil.”

138 U.K. For paragraph 8 substitute—

“8 (1) Chargeable gains are treated as accruing in a tax year (“the relevant tax year”) to a beneficiary who has received a capital payment from the trustees of a relevant settlement in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount in the Schedule 4C pool for the relevant tax year or any earlier tax year.

(2) The amount of chargeable gains treated as accruing is equal to—

(a) the amount of the capital payment, or

(b) if only part of the capital payment is matched, the amount of that part.

(3) Section 87A applies for a tax year for the purposes of matching capital payments received from the trustees of a relevant settlement with section 2(2) amounts in the Schedule 4C pool as if—

(a) references to section 2(2) amounts were to section 2(2) amounts in the Schedule 4C pool,

(b) references to a capital payment received from the trustees by a beneficiary were to a capital payment received from the trustees of a relevant settlement by a beneficiary who is chargeable to tax for that year, and

(c) for section 87A(3)(b) there were substituted—

“(b) all section 2(2) amounts in the Schedule 4C pool have been reduced to nil.”

(4) Section 87A applies for a tax year by virtue of this paragraph before it applies for that year otherwise than by virtue of this paragraph; but this is subject to sub-paragraph (5).

(5) If section 87A applies for a tax year by virtue of section 762(3) of the Taxes Act (offshore income gains), it applies for that year by virtue of that provision before it applies for that year by virtue of this paragraph.”

139 U.K. After paragraph 8A insert—

“Attribution of gains: remittance basis U.K.

8AA Section 87B (remittance basis) applies in relation to chargeable gains treated under paragraph 8 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.”

140 U.K. Omit paragraphs 8B and 8C (including the heading before paragraph 8B).

141 U.K. For paragraph 9 (and the heading before it) substitute—

“Attribution of gains: disregard of certain capital payments U.K.

9 (1) For the purposes of paragraph 8 (and section 87A as it applies for the purposes of that paragraph), no account is to be taken of a capital payment to which any of sub-paragraphs (2) to (4) applies (or a part of a capital payment to which sub-paragraph (4) applies).

(2) This sub-paragraph applies to a capital payment received before the tax year preceding the tax year in which the original transfer is made.

(3) This sub-paragraph applies to a capital payment that—

(a) is received by a beneficiary of a settlement from the trustees in a tax year during the whole of which the trustees—

(i) are resident and ordinarily resident in the United Kingdom, and

(ii) are not Treaty non-resident,

(b) was made before any transfer of value to which Schedule 4B applies was made, and

(c) was not made in anticipation of the making of any such transfer of value or of chargeable gains accruing under that Schedule.

(4) This sub-paragraph applies to a capital payment if (and to the extent that) it is received (or treated as received) in a tax year from the trustees by a company that—

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

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

(and is not treated under any of subsections (3) to (5) of section 96 as received by another person).”

142 U.K. In paragraph 10 (residence of trustees from whom capital payment received)—

(a) in sub-paragraph (1), for “sub-paragraph (2) below” substitute “ paragraph 9(3) ”, and

(b) omit sub-paragraphs (2) and (3).

143 (1) Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended as follows. U.K.

(2) For sub-paragraphs (1) to (3) substitute—

“(1) This paragraph applies if—

(a) by virtue of section 10A, an amount of chargeable gains within section 86(1)(e) that accrued in an intervening year to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the year of return, and

(b) after paragraph 8 has applied for the year of return, the section 2(2) amount for the intervening year that is in the Schedule 4C pool for the settlement is less than the amount mentioned in paragraph (a).

(2) The amount of chargeable gains treated as mentioned in sub-paragraph (1)(a) as accruing to the settlor in the year of return is limited to the section 2(2) amount referred to in sub-paragraph (1)(b).”

144 U.K. In paragraph 12A(3), for “87(4)” substitute “ 87(2) ”.

145 (1) Paragraph 13 (increase in tax payable under this Schedule) is amended as follows. U.K.

(2) For sub-paragraph (1) substitute—

“(1) This paragraph applies if—

(a) chargeable gains are treated under paragraph 8 as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”), and

(b) the beneficiary is charged to tax by virtue of the matching.

(1A) Where part of a capital payment is matched, references in sub-paragraphs (2) and (3) to the capital payment are to the part matched.”

(3) In sub-paragraph (5)(a), for the words from “year of assessment” to the end (excluding the “and”) substitute “ tax year immediately after the relevant tax year, ”.

146 U.K. Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.

Attribution of gains to beneficiaries in cases involving transfers of value: commencement etc U.K.

147 U.K. The amendments made by paragraphs 128 to 146 have effect in relation to transfers of value to which Schedule 4B to TCGA 1992 applies that are made on or after 6 April 2008.

148 U.K. For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 (and section 87A of that Act as it applies for the purposes of that paragraph), no account is to be taken of any capital payment received before 21 March 2000.

149 U.K. A capital payment received before 6 April 2008 is not within paragraph 9(4) of Schedule 4C to TCGA 1992 (if it otherwise would be).

150 U.K. Paragraph 124 applies in relation to chargeable gains treated under paragraph 8 of Schedule 4C to TCGA 1992 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.

151 (1) This paragraph applies for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”) if— U.K.

(a) an individual who was resident or ordinarily resident, but not domiciled, in the United Kingdom in the tax year 2007-08 received a capital payment from the trustees of a settlement on or after 12 March 2008 but before 6 April 2008, and

(b) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.

(2) For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 as it applies for the relevant tax year (and section 87A of that Act as it applies for those purposes), no account is to be taken of the capital payment.

Attribution of gains to beneficiaries: existing Schedule 4C pools U.K.

152 U.K. Schedule 4C to TCGA 1992 (as it has effect without the amendments made by paragraphs 128 to 146) applies for the tax year 2008-09 and subsequent tax years in relation to Schedule 4C pools created before 6 April 2008 (“existing Schedule 4C pools”) as if paragraphs 7B and 9(2) were omitted.

153 U.K. Any reduction in the amount of a capital payment has effect for the purposes of Schedule 4C to TCGA 1992 as it applies in relation to existing Schedule 4C pools (as well as for other purposes).

154 (1) If all of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced to nil. U.K.

(2) If part of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced by the amount of that part.

(3) A capital payment “ceases to be available” in a tax year if and to the extent that, by reason of the capital payment, chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in that year to the recipient.

(4) If—

(a) chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in a tax year,

(b) more than one capital payment that the beneficiary has received is taken into account for the purposes of determining the amount of chargeable gains treated as accruing to the beneficiary, and

(c) the amount of the chargeable gains is less than the total amount of capital payments taken into account,

sub-paragraph (3) applies in relation to earlier capital payments before later ones.

155 U.K. In any tax year—

(a) Schedule 4C to TCGA 1992 (as amended by paragraphs 128 to 146) applies in relation to a settlement before that Schedule (as it has effect without those amendments) applies in relation to the settlement, and

(b) that Schedule (as it has effect without those amendments) applies in relation to the settlement before section 87 or 89(2) of that Act applies in relation to the settlement.

Transfers of securities: accrued income profits U.K.

156 U.K. In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—

(a) omit the “and” at the end of paragraph (f), and

(b) at the end of paragraph (g) insert—

“(h) section 670A of ITA 2007 (accrued income profits),”.

157 U.K. In section 617 of ITA 2007 (accrued income profits: income charged), after subsection (6) insert—

“(7) Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis).”

158 U.K. Omit section 644 of that Act (accrued income profits: individuals to whom remittance basis applies).

159 U.K. After section 670 of that Act insert—

“Individuals to whom remittance basis applies U.K.

670A Individuals to whom remittance basis applies

(1) This section applies if—

(a) accrued income profits are made by an individual as a result of a transfer of foreign securities, and

(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the tax year in which the profits are made.

(2) Treat the accrued income profits as relevant foreign income of the individual.

(3) For the purposes of Chapter A1 of Part 14 (remittance basis)—

(a) if the individual is the transferor—

(i) treat any consideration for the transfer as deriving from the accrued income profits, and

(ii) if on the transfer the individual does not receive consideration of an amount equal to (or exceeding) the market value of the securities, treat the securities as deriving from the accrued income profits, and

(b) if the individual is the transferee, treat the securities as deriving from the accrued income profits.

(4) For the purposes of this section securities are “foreign” if income from them would be relevant foreign income.”

160 U.K. The amendments made by paragraphs 156 to 159 have effect in relation to transfers of securities where the settlement day is on or after 6 April 2008.

Transfers of assets abroad U.K.

F8 161 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F8 Sch. 7 para. 161 omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 470

162 U.K. In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”), after paragraph (h) insert “and

(i) sections 726, 730 and 735 of that Act (transfer of assets abroad: foreign deemed income).”

163 U.K. ITA 2007 is amended as follows.

164 U.K. In section 720(4) (transfer of assets abroad: charge where power to enjoy income), after “abroad)” insert “ and section 726 (non-UK domiciled individuals to whom remittance basis applies) ”.

165 U.K. For section 726 substitute—

“726 Non-UK domiciled individuals to whom remittance basis applies

(1) This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if—

(a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(b) the individual is not domiciled in the United Kingdom in the year.

(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual's.

(3) Treat the foreign deemed income as relevant foreign income of the individual.

(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.”

166 U.K. In section 727 (transfer of assets abroad: charge where capital sums received), after subsection (3) insert—

“(3A) But see section 730 (non-UK domiciled individuals to whom remittance basis applies).”

167 U.K. For section 730 substitute—

“730 Non-UK domiciled individuals to whom remittance basis applies

(1) This section applies in relation to income treated under section 728 as arising to an individual in a tax year (“the deemed income”) if—

(a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(b) the individual is not domiciled in the United Kingdom in the year.

(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 728(1)(a) would be relevant foreign income if it were the individual's.

(3) Treat the foreign deemed income as relevant foreign income of the individual.

(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 728(1)(a) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.”

168 U.K. In section 731 (transfer of assets abroad: charge where benefit received), after subsection (2) insert—

“(2A) But see section 735 (non-UK domiciled individuals to whom remittance basis applies).”

169 U.K. For section 735 substitute—

“735 Non-UK domiciled individuals to whom remittance basis applies

(1) This section applies if—

(a) income is treated under section 732 as arising to an individual in a tax year (“the deemed income”),

(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and

(c) the individual is not domiciled in the United Kingdom in the year.

(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the relevant income to which it relates would be relevant foreign income if it were the individual's.

(3) Treat the foreign deemed income as relevant foreign income of the individual.

(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat relevant income, or a benefit, that relates to any part of the foreign deemed income as deriving from that part of the foreign deemed income.

735A Section 735: relevant income and benefits relating to foreign deemed income

(1) For the purposes of section 735—

(a) place the benefits mentioned in Step 1 in the order in which they were received by the individual (starting with the earliest benefit received),

(b) deduct from those benefits so much of any benefit within section 734(1)(b) as gives rise as mentioned in section 734(1)(d) to chargeable gains or offshore income gains,

(c) place the income mentioned in Step 3 for the tax years mentioned in Step 4 (“the relevant income”) in the order determined under subsection (3),

(d) deduct from that income any income that may not be taken into account because of section 743(1) or (2) (no duplication of charges),

(e) place the income treated under section 732(2) as arising to the individual in respect of the benefits in the order in which it is treated as arising (starting with the earliest income treated as having arisen), and

(f) treat the income mentioned in paragraph (e) as related to—

(i) the benefits, and

(ii) the relevant income,

by matching that income with the benefits and the relevant income (in the orders mentioned in paragraphs (a), (c) and (e)).

(2) In subsection (1) references to a step are to a step in section 733(1).

(3) The order referred to in subsection (1)(c) is arrived at by taking the following steps.

Step 1

Find the relevant income for the earliest tax year (of the tax years referred to in subsection (1)(c)).

Step 2

Place so much of that income as is not foreign in the order in which it arose (starting with the earliest income to arise).

Step 3

After that, place so much of that income as is foreign in the order in which it arose (starting with the earliest income to arise).

Step 4

Repeat Steps 1 to 3.

For this purpose, read references to the relevant income for the earliest tax year as references to the relevant income for the first tax year after the last tax year in relation to which those Steps have been undertaken.

(4) For the purposes of subsection (3) relevant income is “foreign” where it would be relevant foreign income if it were the individual's.

(5) For those purposes treat income for a period as arising immediately before the end of the period.

(6) Subsection (1)(d) does not apply if the income may not be taken into account because the individual has been charged to income tax under section 731 by reason of the income.”

170 U.K. The amendments made by paragraphs 161 to 169 have effect for the tax year 2008-09 and subsequent tax years.

General U.K.

171 U.K. For the purposes of this Part of this Schedule, the market value of any asset is its market value for the purposes of TCGA 1992.