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Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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(c) individuals to whom income is treated as arising under section 732 (non-transferors receiving a benefit as a result of relevant transactions).

(2) The charges apply only if a relevant transfer occurs, and they operate by reference to income of a person abroad that is connected with the transfer or another relevant transaction.

(3) For the meaning of “relevant transaction”, “relevant transfer” and “person abroad”, see sections 715, 716 and 718 respectively.

(4) In this Chapter references to individuals include their spouses or civil partners.

Meaning of “relevant transaction”

715

(1) A transaction is a relevant transaction for the purposes of this Chapter if it is—

(a) a relevant transfer, or

(b) an associated operation.

(2) For the meaning of “relevant transfer” and “associated operation”, see sections 716 and 719 respectively.

Meaning of “relevant transfer” and “transfer”

716

(1) A transfer is a relevant transfer for the purposes of this Chapter if—

(a) it is a transfer of assets, and

(b) as a result of—

(i) the transfer,

(ii) one or more associated operations, or

(iii) the transfer and one or more associated operations,

income becomes payable to a person abroad.

(2) In this Chapter “transfer”, in relation to rights, includes the creation of the rights.

(3) For the meaning of “assets”, see section 717.

Meaning of “assets” etc

717

In this Chapter—

(a) “assets” includes property or rights of any kind, and

(b) references to assets representing any assets, income or accumulations of income include references to—

(i) shares in or obligations of any company to which the assets, income or accumulations are or have been transferred, or

(ii) obligations of any other person to whom the assets, income or accumulations are or have been transferred.

Meaning of “person abroad” etc

718

(1) In this Chapter “person abroad” means a person who is resident outside the United Kingdom.

(2) For the purposes of this Chapter, the following persons are treated as resident outside the United Kingdom—

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

(b) the person treated as non-UK resident under section 475(3) (trustees of settlements), and

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “associated operation”

719

(1) In this Chapter “associated operation”, in relation to a transfer of assets, means an operation of any kind effected by any person in relation to—

(a) any of the assets transferred,

(b) any assets directly or indirectly representing any of the assets transferred,

(d) any assets directly or indirectly representing the accumulations of income arising from any assets within paragraph (a) or (b).

(2) It does not matter whether the operation is effected before, after or at the same time as the transfer.

Charge where power to enjoy income

Charge to tax on income treated as arising under section 721

720

(1) The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are ... UK resident by means of relevant transfers.

(2) Income tax is charged on income treated as arising to such an individual under section 721 (individuals with power to enjoy income as a result of relevant transactions).

(3) Tax is charged under this section on the amount of income treated as arising in the tax year.

(4) But see section 724 (special rules where benefit provided out of income of person abroad) ....

(5) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.

(6) For rules about the reduction in the amount charged in some circumstances and the availability of deductions and reliefs, see—

section 725 (reduction in amount charged where controlled foreign company involved), and

section 746 (deductions and reliefs where individual charged under this section or section 727).

(7) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction etc).

Individuals with power to enjoy income as a result of relevant transactions

721

(1) Income is treated as arising to such an individual as is mentioned in section 720(1) or 720A(1) in a tax year for income tax purposes if conditions A to C are met.

(2) Condition A is that the individual has power in the tax year to enjoy income of a person abroad as a result of—

(a) a relevant transfer,

(b) one or more associated operations, or

(3) Condition B is that the income of the person abroad would be chargeable to income tax if it were the individual's and received by the individual in the United Kingdom.

(3A) Condition C is that the individual is UK resident for the tax year.

(3B) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to sections 724 and 725).

(3C) Subsection (1) does not apply if—

(a) the individual is liable for income tax charged on the income of the person abroad by virtue of a charge not contained in this Chapter, and

(b) all that income tax has been paid.

(4) For the purposes of subsection (2), it does not matter whether the income of the person abroad may be enjoyed immediately or only later.

(5) It does not matter for the purposes of this section—

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

(b) whether the individual is UK resident for the tax year in which the relevant transfer is made (if different from the tax year mentioned in subsection (1)), or

(6) For the circumstances in which an individual is treated as having the power to enjoy income for the purposes of this section, see section 722.

When an individual has power to enjoy income of person abroad

722

(1) For the purposes of section 721, an individual is treated as having power to enjoy income of a person abroad if any of the enjoyment conditions are met.

(2) In subsection (1) “the enjoyment conditions” means conditions A to E as specified in section 723.

(3) In determining whether an individual has power to enjoy income for the purposes of section 721, regard must be had to the substantial result and effect of all the relevant transactions.

(4) In making that determination all benefits which may at any time accrue to the individual as a result of the transfer and any associated operations must be taken into account, irrespective of—

(a) the nature or form of the benefits, or

(b) whether the individual has legal or equitable rights in respect of the benefits.

The enjoyment conditions

723

(1) Condition A is that the income is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of the individual, whether in the form of income or not.

(2) Condition B is that the receipt or accrual of the income operates to increase the value to the individual—

(a) of any assets the individual holds, or

(b) of any assets held for the individual's benefit.

(3) Condition C is that the individual receives or is entitled to receive at any time any benefit provided or to be provided out of the income or related money.

(4) In subsection (3) “related money” means money which is or will be available for the purpose of providing the benefit as a result of the effect or successive effects—

(a) on the income, and

(b) on any assets which directly or indirectly represent the income,

of the associated operations referred to in section 721(2).

(5) Condition D is that the individual may become entitled to the beneficial enjoyment of the income if one or more powers are exercised or successively exercised.

(6) For the purposes of subsection (5) it does not matter—

(a) who may exercise the powers, or

(b) whether they are exercisable with or without the consent of another person.

(7) Condition E is that the individual is able in any manner to control directly or indirectly the application of the income.

Special rules where benefit provided out of income of person abroad

724

(1) This section applies if an individual has power to enjoy income of a person abroad for the purposes of section 721 because of receiving any such benefit as is referred to in section 723(3) (benefit provided out of income of person abroad).

(2) Despite anything in section 720, the individual is liable to income tax under that section for the tax year in which the benefit is received on an amount equal to the whole of the amount or value of that benefit.

(3) But subsection (2) does not apply so far as it is shown that the benefit derives directly or indirectly from income by reference to which the individual has already been charged to income tax for that tax year or a previous tax year under this Chapter.

Reduction in amount charged where controlled foreign company involved

725

(1) This section applies if—

(a) under Part 9A of TIOPA 2010 (controlled foreign companies), the CFC charge is charged in relation to a CFC's accounting period,

(b) an amount of income is treated as arising to an individual under section 721 for a tax year, and

(c) the income mentioned in section 721(2) is or includes a sum forming part of the CFC's chargeable profits for that accounting period.

(2) The amount of income so treated is reduced by—

$$S×CACP$where—S is the sum forming part of the CFC's chargeable profits for that accounting period,CA is the CFC's chargeable profits for that accounting period so far as apportioned to chargeable companies at step 3 in section 371BC(1) of TIOPA 2010, andCP is the CFC's chargeable profits for that accounting period.$

(2A) In a case in which section 724 applies, the reference to S in the formula in subsection (2) is to be read as a reference to X% of S.

(2B) “X%” is determined as follows—

$$100 % × A I$where—A is the amount on which the individual is liable as determined under section 724(2), andI is the amount of the income mentioned in section 721(2).$

(3) Terms used in this section which are defined in Part 9A of TIOPA 2010 have the same meaning as in that Part.

Non-domiciled individuals

726

(1) Subsection (2) applies in relation to income treated under section 721 as arising to an individual (“the deemed income”)—

(a) in the tax year 2024-25 or an earlier tax year if section 809B, 809D or 809E (remittance basis) applied to the individual for that tax year, or

(b) in the tax year 2025-26 or a later tax year if the individual is entitled to claim relief under section 845A of ITTOIA 2005 (qualifying new residents) for that tax year.

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

(2A) Subsections (3) to (5) apply where the deemed income falls within subsection (1)(a).

(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.

(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) As to income falling within subsection (1)(b), see the table in section 845H of ITTOIA 2005 (under which deemed income that is foreign for the purposes of this section is “qualifying foreign income” and so may be identified in a foreign income claim).

Charge where capital sums received

Charge to tax on income treated as arising under section 728

727

(1) The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are ... UK resident by means of relevant transfers.

(2) Income tax is charged on income treated as arising to such an individual under section 728 (individuals receiving capital sums as a result of relevant transactions).

(3) Tax is charged under this section on the amount of income treated as arising in the tax year.

(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.

(5) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction , etc).

(6) For rules about the availability of deductions and reliefs where income is charged under this section, see section 746 (deductions and reliefs where individual charged under section 720 or this section).

Individuals receiving capital sums as a result of relevant transactions

728

(1) Income is treated as arising to such an individual as is referred to in section 727(1) or 727A(1) in a tax year for income tax purposes if—

(a) income has become the income of a person abroad as a result of—

(i) a relevant transfer,

(ii) one or more associated operations, or

(iii) a relevant transfer and one or more associated operations, ...

(b) the capital receipt conditions are met in respect of the individual in the tax year (see section 729) , and

(1A) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to subsection (2)).

(2) Section 725 (reduction in amount charged where controlled foreign company involved) applies for determining the amount of income treated as arising under subsection (1) as if—

(a) in subsection (1) of that section—

(i) the reference to section 721 were a reference to this section, and

(ii) the reference to section 721(2) were a reference to subsection (1)(a) of this section, and

(b) subsections (2A) and (2B) of that section were omitted.

(2A) Subsection (1) does not apply if—

(a) the individual is liable for income tax charged on the income of the person abroad by virtue of a charge not contained in this Chapter, and

(b) all that income tax has been paid.

(3) It does not matter for the purposes of this section—

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

(b) whether the individual is UK resident for the tax year in which the relevant transfer abroad is made (if different from the tax year mentioned in subsection (1)), or

The capital receipt conditions

729

(1) For the purposes of section 728(1), the capital receipt conditions are met in respect of the individual in a tax year (“the relevant year”) if—

(a) either—

(i) in the relevant year the individual receives or is entitled to receive any capital sum, whether before or after the relevant transfer, or

(ii) in any earlier tax year the individual has received any capital sum, whether before or after the relevant transfer, and

(b) the payment of that sum is (or, in the case of an entitlement, would be) in any way connected with any relevant transaction.

(2) But subsection (1)(a)(ii) does not apply merely because of the receipt of a sum by way of loan if the loan is wholly repaid before the relevant year begins.

(3) In subsection (1) “capital sum” means—

(a) any sum paid or payable by way of loan or repayment of a loan, and

(b) any other sum paid or payable—

(i) otherwise than as income, and

(ii) not for full consideration in money or money's worth.

(4) For the purposes of subsection (1), a sum is treated as a capital sum which the individual (“A”) receives or is entitled to receive if another person receives or is entitled to receive it—

(a) at A's direction, or

(b) as a result of the assignment by A of A's right to receive it.

Non-domiciled individuals

730

(1) Subsection (2) applies in relation to income treated under section 728 as arising to an individual (“the deemed income”)—

(a) in the tax year 2024-25 or an earlier tax year if section 809B, 809D or 809E (remittance basis) applied to the individual for that tax year, or

(b) in the tax year 2025-26 or a later tax year if the individual is entitled to claim relief under section 845A of ITTOIA 2005 (qualifying new residents) for that tax year.

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

(2A) Subsections (3) to (5) apply where the deemed income falls within subsection (1)(a).

(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.

(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) As to income falling within subsection (1)(b), see the table in section 845H of ITTOIA 2005 (under which deemed income that is foreign for the purposes of this section is “qualifying foreign income” and so may be identified in a foreign income claim).

Charge where benefit received

Charge to tax on income treated as arising under section 732

731

(1) Income tax is charged on income treated as arising to an individual under section 732 (non-transferors receiving a benefit as a result of relevant transactions).

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Tax is charged under this section on the amount of income treated as arising for the tax year.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The person liable for any tax charged under this section is the individual to whom the income is treated as arising ...

(4) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction , etc).

Non-transferors receiving a benefit as a result of relevant transactions

732

(1) This section applies if—

(a) a relevant transfer occurs,

(b) an individual who is UK resident for a tax year receives a benefit in that tax year,

(i) the transfer, or

(ii) one or more associated operations,

(d) the individual is not liable to income tax under section 720 or 727 by reference to the transfer and would not be so liable if the effect of sections 726 and 730 were ignored, and

(e) the individual is not liable to income tax , under any provision that is none of section 731 of this Act and sections 643A, 643J and 643L of ITTOIA 2005, on the amount or value of the benefit ....

(2) Income is treated as arising to the individual for income tax purposes for any tax year for which section 733 provides that income arises.

(3) Also see that section for the amount of income treated as arising for any such tax year.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income charged under section 731

733

(1) To find the amount (if any) of the income treated as arising under section 732(2) for any tax year in respect of benefits provided as mentioned in section 732(1)(c) take the following steps.

Step 1

Identify the amount or value of such benefits received by the individual in the tax year and in any earlier tax years in which section 732 has applied.

The sum of those amounts and values is “the total benefits”.

Step 2

Deduct from the total benefits the total amount of income treated as arising to the individual under section 732(2) for earlier tax years as a result of the relevant transfer or associated operations.

The result is “the total untaxed benefits” ....

Step 3

Identify the amount of any income which—

(a) arises in the tax year to a person abroad, and

(b) as a result of the relevant transfer or associated operations can be used directly or indirectly for providing a benefit for the individual.

That amount is “the relevant income of the tax year” in relation to the individual and the tax year.

Step 4

Add together the relevant income of the tax year and the relevant income of earlier tax years in relation to the individual (identified as mentioned in Step 3).

The sum of those amounts is “total relevant income”.

Step 5

Deduct from total relevant income—

(a) the amount deducted at Step 2, and

(b) any other amount which may not be taken into account because of section 743(1) and (2) (no duplication of charges).

The result is “the available relevant income”.

Step 6

Compare the total untaxed benefits and the available relevant income.

The amount of the income treated as arising under section 732(2) for any tax year is the total untaxed benefits unless the available relevant income is lower.

If the available relevant income is lower, it is the amount of income treated as so arising.

(2) Subsection (1) is subject to section 734 (reduction in amount charged: previous capital gains tax charge).

(2A) For the purposes of subsection (1), the amount deducted at Step 2 does not include the amount of any income on which tax was not charged under section 731 by virtue of—

(a) section 735AD(2) (transferor not taxable under benefits charge except where benefit matched to protected foreign-source income etc), or

(b) section 731(1A) (equivalent provision for tax years 2024-25 and earlier).

(2B) For the purposes of subsection (1), if in a tax year—

(a) income is treated as arising to an individual under section 721, 728 or 732, and

(b) the income is identified as qualifying foreign income on a foreign income claim,

the income is treated for later tax years as not having been charged to income tax ....

(2C) It follows from subsection (2B) that—

(a) in the application of subsection (1) to the individual for subsequent tax years, the amount of the income will be deducted at Step 2 and at paragraph (a) of Step 5, but

(b) in the application of subsection (1) to any other individual for subsequent tax years, the amount of the income will not be deducted at paragraph (b) of Step 5.

(2D) See paragraph 11 of Schedule 10 to FA 2025 (temporary repatriation facility) for special provision about income that is treated as arising under section 732 but that is exempt from income tax under that Schedule.

(2E) See subsections (7) and (8) of section 53 of FA 2026 (offshore income gains: savings relating to amendments made by section 52 of that Act) for special provision about income that is treated as arising under section 732 but that is not chargeable to income tax under subsection (3) of that section.

(3) See also section 740(5) to (7) (which makes provision about relevant income and benefits where relevant transactions include both transactions before 5 December 2005 and transactions after 4 December 2005 and exemptions under this Chapter cease to apply).

Reduction in amount charged: previous capital gains tax charge

734

(1) This section applies if—

(a) benefits provided as mentioned in section 732(1)(c) are received in a tax year,

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) chargeable gains are treated by section 87, 87K, 87L or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to a person in that or a subsequent tax year by reference (direct or indirect) to the whole or part of any benefits so provided.

(2) For any tax year after one in which such chargeable gains are so treated, the amount of income treated as arising to the individual under section 732(2) in respect of benefits provided as mentioned in section 732(1)(c) as a result of the transfer or operations in question is calculated as follows.

(3) The amount is calculated under section 733(1) as if the total untaxed benefits were reduced by the amount of those gains.

(4) In this section “the total untaxed benefits” has the same meaning as in section 733(1) (see Step 2).

(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 regulations ... 22 to 24 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)).

Non-domiciled individuals

735

(1) Subsection (2) applies in relation to income treated under section 732 as arising to an individual (“the deemed income”)—

(a) in the tax year 2024-25 or an earlier tax year if section 809B, 809D or 809E (remittance basis) applied to the individual for that tax year, or

(b) in the tax year 2025-26 or a later tax year if the individual is entitled to claim relief under section 845A of ITTOIA 2005 (qualifying new residents) for that tax 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.

(2A) Subsections (3) to (5) apply where the deemed income falls within subsection (1)(a).

(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.

(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

(6) As to income falling within subsection (1)(b), see the table in section 845H of ITTOIA 2005 (under which deemed income that is foreign for the purposes of this section is “qualifying foreign income” and so may be identified in a foreign income claim).

Exemptions: no tax avoidance purpose or genuine commercial transaction

Exemptions: introduction

736

(1) Sections 737 to 742 deal with exemptions from liability under this Chapter.

(2) Some exemptions apply according to whether the relevant transactions are all pre-5 December 2005 transactions or all post-4 December 2005 transactions or include both (see sections 737, 739 and 740).

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In this section and sections 737 to 742—

“post-4 December 2005 transaction” means a relevant transaction effected on or after 5 December 2005, and

“pre-5 December 2005 transaction” means a relevant transaction effected before 5 December 2005.

Exemption: all relevant transactions post-4 December 2005 transactions

737

(1) This section applies if all the relevant transactions are post-4 December 2005 transactions.

(2) An individual is not liable to income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs—

(a) that Condition A is met, or

(b) in a case where Condition A is not met, that Condition B is met.

(3) Condition A is that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected.

(4) Condition B is that—

(a) all the relevant transactions were genuine commercial transactions (see section 738), and

(b) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.

(5) In determining the purposes for which the relevant transactions or any of them were effected, the intentions and purposes of any person within subsection (6) are to be taken into account.

(6) A person is within this subsection if, whether or not for consideration, the person—

(a) designs or effects, or

(b) provides advice in relation to,

the relevant transactions or any of them.

(7) In this section—

“revenue” includes taxes, duties and national insurance contributions,

“taxation” includes any revenue for whose collection and management the Commissioners for Her Majesty's Revenue and Customs are responsible.

(8) If—

(a) apart from this subsection, an associated operation would not be taken into account for the purposes of this section, and

(b) the conditions in subsections (2) to (4) are not met if it is taken into account, because of—

(i) the associated operation, or

(ii) the associated operation taken together with any other relevant transactions,

it must be taken into account for those purposes.

Meaning of “commercial transaction”

738

(1) For the purposes of section 737, a relevant transaction is a commercial transaction only if it meets the conditions in subsections (2) and (3).

(2) It must be effected—

(a) in the course of a trade or business and for its purposes, or

(b) with a view to setting up and commencing a trade or business and for its purposes.

(3) It must not—

(a) be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or

(b) be a transaction that would not have been entered into between such persons so dealing.

(4) For the purposes of subsection (2), making investments, managing them or making and managing them is a trade or business only so far as—

(a) the person by whom it is done, and

(b) the person for whom it is done,

are persons not connected with each other and are dealing at arm's length.

Exemption: all relevant transactions pre-5 December 2005 transactions

739

(1) This section applies if all the relevant transactions are pre-5 December 2005 transactions.

(2) An individual is not liable for income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs that condition A or B is met.

(3) Condition A is that the purpose of avoiding liability to taxation was not the purpose, or one of the purposes, for which the relevant transactions or any of them were effected.

(4) Condition B is that the transfer and any associated operations—

(a) were genuine commercial transactions, and

(b) were not designed for the purpose of avoiding liability to taxation.

Exemption: relevant transactions include both pre-5 December 2005 and post-4 December 2005 transactions

740

(1) This section applies if the relevant transactions include both pre-5 December transactions and post-4 December transactions.

(2) An individual is not liable to tax under this Chapter for the tax year by reference to the relevant transactions if—

(a) the condition in section 737(2) (exemption where all relevant transactions are post-4 December 2005 transactions) is met by reference to the post-4 December 2005 transactions, and

(b) the condition in section 739(2) (exemption where all relevant transactions are pre-5 December 2005 transactions) is met by reference to the pre-5 December transactions.

(3) If subsection (2)(b) applies but subsection (2)(a) does not, this Chapter applies with the modifications in subsections (4) to (6).

(4) For the purposes of sections 720 to 730, any income arising before 5 December 2005 must not be brought into account as income of the person abroad.

(5) In determining the relevant income of an earlier tax year for the purposes of section 733(1) (see Step 4), it does not matter whether that year was a year for which the individual was not liable under section 731 because of section 739 or this section.

(6) For the purposes of Step 1 in section 733(1), a benefit received by the individual in or before the tax year 2005-06 is to be left out of account.

(7) But, in the case of a benefit received in the tax year 2005-06, subsection (6) applies only so far as, on a time apportionment basis, the benefit fell to be enjoyed in any part of the year that fell before 5 December 2005.

Application of section 742 (partial exemption)

741

(1) Section 742 (partial exemption where later associated operations fail conditions) applies if—

(a) an individual is liable to tax because of section 720 or 727 for a tax year (the “taxable year”) because condition B in section 737(4) (genuine commercial transaction: post-4 December 2005 transactions) is not met, and

(b) subsections (2) and (3) apply.

(2) This subsection applies if—

(a) since the relevant transfer there has been at least one tax year for which the individual was not so liable by reference to the relevant transactions effected before the end of the year, and

(b) the individual was not so liable for that year because—

(i) condition B in section 737(4) was met, or

(ii) condition B in section 739(4) (genuine commercial transaction: pre-5 December 2005 transactions) was met.

(3) This subsection applies if 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 one of those conditions was met for the last exempt tax year, and

(b) partly to associated operations not falling within paragraph (a).

(4) For the purposes of this section a tax year is exempt if—

(a) it is one of the tax years mentioned in subsection (2), and

(b) there is no earlier tax year for which the individual was liable to tax because of section 720 or 727 by reference to the relevant transactions or any of them.

(5) References in this section to a person being liable to tax for a tax year because of section 720 or 727 include references to the individual being so liable had any income been treated as arising to the individual for that year under section 721 or 728.

Partial exemption where later associated operations fail conditions

742

(1) If this section applies, the individual is liable to tax under this Chapter only in respect of part of the income for which the individual would otherwise be liable.

(2) That part is so much of the income as appears to an officer of Revenue and Customs to be justly and reasonably attributable to the operations mentioned in section 741(3)(b) in all the circumstances of the case.

(3) Those circumstances include how far those operations or any of them directly or indirectly affect—

(a) the nature or amount of any person's income, or

(b) any person's power to enjoy any income.

General

No duplication of charges

743

(1) No amount of income may be taken into account more than once in charging income tax under this Chapter.

(2) If there is a choice about the persons in relation to whom any amount of income may be taken into account in charging income tax under this Chapter, it is to be taken into account—

(a) in relation to such one or more of them as appears to an officer of Revenue and Customs to be just and reasonable, and

(b) if more than one, in such respective proportions as appears to the officer to be just and reasonable.

(2A) Subsection (2B) applies if—

(a) in the case of an individual, an amount of income is taken into account in charging income tax under section 720 or 727, and

(b) the individual subsequently receives that income.

(2B) The income received is treated as not being the individual's income for income tax purposes.

(3) For the meaning of references in this section to an amount of income taken into account in charging tax, see section 744.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of taking income into account in charging income tax for section 743

744

(1) References in section 743 (no duplication of charges) to an amount of income taken into account in charging income tax are to be read as follows.

(2) In the case of tax charged on income under section 720 (charge where income enjoyed as a result of relevant transactions)—

(a) if section 724(1) (benefit provided out of income of person abroad) applies, they are references to an amount of the income out of which the benefit is provided equal to the amount ... charged, and

(b) otherwise they are references to the amount of the income mentioned in section 721(2).

(3) In the case of tax charged on income under section 727 (charge where capital sums received as a result of relevant transactions), they are references to the amount of the income mentioned in section 728(1)(a).

(4) In the case of tax charged under section 731 (charge to tax on income treated as arising to non-transferors where benefit received as a result of relevant transfers), they are references to the amount of relevant income taken into account under section 733 (income charged under section 731) in calculating the amount to be charged in respect of the benefit for the tax year in question.

Rates of tax applicable to income charged under sections 720 and 727 etc

745

(1) Income tax at the basic rate, or the starting rate for savings when that rate is more than 0%, ... is not charged under section 720 or 727 in respect of any income if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) has borne tax at that rate by deduction or otherwise.

(1A) Income tax at a Scottish rate above 0% and below, or equal to, the basic rate is not charged under section 720 or 727 in respect of any income if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) has borne tax at the basic rate.

(1B) Income tax at the Welsh basic rate when that rate is above 0% and below, or equal to, the basic rate is not charged under section 720 or 727 in respect of any income if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) has borne tax at the basic rate.

(2) Subsections (1) , (1A) and (1B) do not affect the tax charged if section 724(2) applies (benefit provided out of income of person abroad charged in year of receipt).

(3) Subsection (4) applies to income treated as arising to an individual under section 721 or 728 so far as none of subsections (1), (1A) and (1B) applies to it.

(4) The charge to income tax under section 720 or 727 operates by treating the income as if it were income within section 19(2) (meaning of “dividend income”) if the income mentioned in section 721(2) or 728(1)(a) would be dividend income were it the income of the individual.

Deductions and reliefs where individual charged under section 720 or 727

746

(1) This section applies for the purpose of calculating the liability to income tax of an individual charged under section 720 or 727.

(2) For the purpose of determining the deductions and reliefs allowed to the individual, the individual is to be treated as if the individual had actually received the amount by reference to which the income treated as arising to the individual under section 721 or 728 is determined.

747

(1) This subsection applies if a person—

(a) would have been treated as—

(i) making qualifying accrued income profits, or

(ii) making qualifying accrued income profits of a greater amount,

in an interest period, but

(b) is not so treated because of being resident ... outside the United Kingdom throughout any tax year in which the interest period (or part of it) falls.

(2) If subsection (1) applies, this Chapter applies as if the amount which the person would be treated as making or, as the case may be, the additional amount were income becoming payable to the person.

(3) Accordingly, any reference in this Chapter to income of (or payable or arising to) a person abroad must be read as including a reference to such an amount.

(4) This subsection applies if income consisting of interest which falls due at the end of an interest period—

(a) would have been income as respects which a person is entitled to an exemption, or an exemption of a greater amount, from liability to income tax under section 679 (interest on securities involving accrued income losses: general), but

(b) is not such income because it is income of a person who is resident ... outside the United Kingdom throughout any tax year in which the interest period (or part of it) falls.

(5) If subsection (4) applies, for the purposes of this Chapter the interest is treated as reduced by the amount of the exemption or, as the case may be, the additional exemption.

(6) In this section—

(a) expressions which are also used in Chapter 2 of Part 12 (accrued income profits) have the same meaning as in that Chapter (but see subsection (7)), and

(b) “qualifying accrued income profits” means accrued income profits which are treated as made—

(i) under section 628(5), or

(ii) under section 630(2) in respect of a transfer of variable rate securities.

(7) In the case of qualifying accrued income profits within sub-paragraph (ii) of the definition of that expression in subsection (6)(b)—

(a) references in subsection (1)(a) to making qualifying accrued income profits in an interest period are to be read as making them in the tax year in which the settlement day falls, and

(b) the reference in subsection (1)(b) to the interest period is to the period—

(i) beginning with the day after the last day of the only or last interest period of the securities, and

(ii) ending with the settlement day.

Supplementary

Power to obtain information

748

(1) An officer of Revenue and Customs may by notice require any person to provide the officer with such particulars as the officer may reasonably require for the purposes of this Chapter.

(2) The officer may direct the time within which the particulars must be provided and that time must be at least 30 days.

(3) The particulars which a person must provide under this section, if required to do so by a notice under subsection (1), include particulars about—

(a) transactions with respect to which the person is or was acting on behalf of others,

(b) transactions which in the opinion of the officer should properly be investigated for the purposes of this Chapter even though in the person's opinion no liability to income tax arises under this Chapter, and

(c) whether the person has taken or is taking any part and, if so, what part in transactions of a description specified in the notice.

(4) A relevant lawyer is not treated as having taken part in a transaction for the purposes of subsection (3)(c) merely because of giving professional advice to a client about it.

(4A) In this section “relevant lawyer” means a barrister, advocate, solicitor or other legal representative communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication.

(5) This section is subject to—

section 749 (restrictions on particulars to be provided by relevant lawyers), and

section 750 (restrictions on particulars to be provided by banks).

Restrictions on particulars to be provided by solicitors

749

(1) In relation to anything done by a relevant lawyer on behalf of a client who does not consent to the information otherwise required from the relevant lawyer under section 748 being provided, the relevant lawyer may not be compelled under that section to do more than—

(a) state that the relevant lawyer is or was acting on behalf of a client, and

(b) give the name and address of the client and any relevant person.

(2) In the case of anything done by the relevant lawyer in connection with the transfer of any asset by or to an individual who is ... UK resident to or by a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades, the transferor and the transferee are relevant persons.

(3) In the case of anything done by the relevant lawyer in connection with any associated operation in relation to any such transfer, the persons concerned in the associated operations are relevant persons.

(4) In the case of anything done by the relevant lawyer in connection with the formation or management of a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades, the body corporate is a relevant person.

(5) In the case of anything done by the relevant lawyer in connection with—

(a) the creation of any settlement as a result of which income becomes payable to a person abroad, or

(b) the execution of the trusts of any such settlement,

the settlor and that person are relevant persons.

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

(7) In this section—

“relevant lawyer” means a barrister, advocate, solicitor or other legal representative communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication;

“settlement” and “settlor” have the meanings given by section 620 of ITTOIA 2005.

(8) In the application of this section to Scotland, any reference to the trusts of a settlement is a reference to the purposes of the settlement.

Restrictions on particulars to be provided by banks

750

(1) Section 748 does not oblige a bank to provide any particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business, unless subsection (2) or (3) applies.

(2) This subsection applies if the bank has acted or is acting on behalf of the customer in connection with—

(a) the creation of any settlement as a result of which income becomes payable to a person abroad, or

(b) the execution of the trusts of any such settlement.

(3) This subsection applies if the bank has acted or is acting on behalf of the customer in connection with the formation or management of a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades.

(4) In this section—

“bank” has the meaning given by section 991, and

“settlement” has the meaning given by section 620 of ITTOIA 2005.

(5) In the application of this section to Scotland, any reference to the trusts of a settlement is a reference to the purposes of the settlement.

Special Commissioners' jurisdiction on appeals

751

On any appeal that is notified to the tribunal, the jurisdiction of the tribunal includes jurisdiction to affirm or replace any decision taken by an officer of Revenue and Customs in exercise of the officer's functions under—

(za) section 720A(4) or 727A(4) (whether individual treated as involved in closely-held companies),

(a) section 737 (exemption: all relevant transactions post-4 December 2005 transactions),

(b) section 738 (meaning of “commercial transaction”),

(d) section 742 (partial exemption where later associated operations fail conditions),

(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) section 743(2) (no duplication of charges: choice of persons in relation to whom income is taken into account).

Chapter 3 — Transactions in land

Introduction

Overview of Chapter

752

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of disposing of land

753

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Priority of other income tax provisions

754

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charge on gains from transactions in land

Charge to tax on gains from transactions in land

755

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income treated as arising when gains obtained from some land disposals

756

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Person obtaining gain

757

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income charged

758

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Person liable

759

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Method of calculating gain

760

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further provisions relevant to the charge

Transactions, arrangements, sales and realisations relevant for Chapter

761

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tracing value

762

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “another person”

763

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuations and apportionments

764

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemptions

Exemption: gain attributable to period before intention to develop formed

765

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemption: disposals of shares in companies holding land as trading stock

766

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemption: private residences

767

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of tax

Recovery of tax where consideration receivable by person not assessed

768

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of tax: certificates of tax paid etc

769

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clearances and power to obtain information

Clearance procedure

770

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to obtain information

771

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation

Interpretation of Chapter

772

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 — Sales of occupation income

Introduction

Overview of Chapter

773

(1) This Chapter imposes a charge to income tax—

(a) on individuals to whom income is treated as arising under section 778 (income arising where capital amount other than derivative property or right obtained), and

(b) on individuals to whom income is treated as arising under section 779 (income arising where derivative property or right obtained).

(2) Income is treated as arising under those sections only if—

(a) transactions are effected or arrangements made to exploit the earning capacity of an individual in an occupation, and

(b) the main object or one of the main objects of the transactions or arrangements is the avoidance or reduction of liability to income tax.

Meaning of “occupation”

774

In this Chapter references to an occupation, in relation to an individual, are references to any activities of a kind undertaken in a profession or vocation, regardless of whether the individual—

(a) is carrying on a profession or vocation on the individual's own account, or

(b) is an employee or office-holder.

Priority of other tax provisions

775

This Chapter has effect subject to—

(a) Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor), and

(b) any other provision of the Tax Acts treating income as belonging to a particular person.

Charge on sale of occupation income

Charge to tax on sale of occupation income

776

(1) Income tax is charged on income treated as arising under—

(a) section 778 (income arising where capital amount other than derivative property or right obtained), or

(b) section 779 (income arising where derivative property or right obtained).

(2) Tax is charged under this section on the full amount of income treated as arising in the tax year.

(3) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.

(4) This section is subject to section 784 (exemption for sales of going concerns).

Conditions for sections 778 and 779 to apply

777

(1) Sections 778 and 779 apply only if conditions A to C are met in respect of an individual.

(2) Condition A is that the individual carries on an occupation wholly or partly in the United Kingdom.

(3) Condition B is that transactions are effected or arrangements made to exploit the individual's earning capacity in the occupation by putting another person (see section 782) in a position to enjoy—

(a) all or part of the income or receipts derived from the individual's activities in the occupation, or

(b) anything derived directly or indirectly from such income or receipts.

(4) The reference in subsection (3) to income or receipts derived from the individual's activities includes a reference to payments for any description of copyright or licence or franchise or other right deriving its value from the individual's activities (including past activities).

(5) Condition C is that as part of, or in connection with, or in consequence of, the transactions or arrangements a capital amount is obtained by the individual for the individual or another person.

(6) For the purposes of subsection (5), the cases where an individual (“A”) obtains a capital amount for another person (“B”) include cases where A has put B in a position to receive the capital amount by providing B with something of value derived, directly or indirectly, from A's activities in the occupation.

(7) In this Chapter “capital amount” means an amount in money or money's worth which does not fall to be included in a calculation of income for purposes of the Tax Acts otherwise than as a result of this Chapter.

Income arising where capital amount other than derivative property or right obtained

778

(1) This section applies if the capital amount obtained as mentioned in section 777(5) does not consist of—

(a) property which derives substantially the whole of its value from the individual's activities, or

(b) a right which does so.

(2) The capital amount is treated for income tax purposes as income arising to the individual.

(3) The income is treated as arising in the tax year in which the capital amount is receivable.

(4) A capital amount is not regarded as having become receivable by a person for the purposes of this section until the person can effectively enjoy or dispose of it.

Income arising where derivative property or right obtained

779

(1) This section applies if—

(a) the capital amount obtained as mentioned in section 777(5) consists of—

(i) property which derives substantially the whole of its value from the activities of an individual, or

(ii) a right which does so, and

(b) the property or right is sold or otherwise realised.

(2) For the purposes of subsection (1), it does not matter whether the capital amount is obtained on one occasion or on two or more occasions (for example, because the individual acquires a stock option and subsequently exercises it).

(3) Income of an amount equal to the proceeds of sale or the realised value is treated for income tax purposes as income arising to the individual.

(4) The income is treated as arising in the tax year in which the property or right is sold or otherwise realised.

Further provisions relevant to the charge

Transactions, arrangements, sales and realisations relevant for Chapter

780

(1) For the purposes of this Chapter, account is to be taken of any method, however indirect, by which—

(a) any property or right is transferred or transmitted, or

(b) the value of any property or right is enhanced or diminished.

(2) Accordingly—

(a) the occasion of the transfer or transmission of any property or right however indirect, and

(b) the occasion when the value of any property or right is enhanced,

may be an occasion when tax is charged under this Chapter.

(3) Subsections (1) and (2) apply in particular—

(a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,

(b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning—

(i) share capital or other rights in a company,

(ii) rights in a partnership, or

(iii) an interest in settled property,

(d) to the creation of a requirement for consent and the giving of consideration for granting it,

(e) to the creation of an embargo affecting the disposition of any property or right and the giving of consideration for releasing it, and

(f) to the disposal of any property or right on the winding up, dissolution or termination of a company, partnership or trust.

Tracing value

781

(1) This section applies if it is necessary to determine the extent to which the value of any property or right is derived from any other property or right for the purposes of this Chapter.

(2) Value may be traced through any number of companies, partnerships and trusts.

(3) The property held by a company, partnership or trust must be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is appropriate in the circumstances.

Meaning of “other person”

782

(1) For the purposes of this Chapter references to other persons are to be read in accordance with subsections (2) to (4).

(2) A partnership or partners in a partnership may be regarded as a person or persons distinct from the individuals or other persons who are for the time being partners.

(3) The trustees of settled property may be regarded as persons distinct from the individuals or other persons who are for the time being trustees.

(4) Personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being personal representatives.

Valuations and apportionments

783

(1) All such valuations are to be made as are appropriate to give effect to this Chapter.

(2) For the purposes of this Chapter, any expenditure, receipt, consideration or other amount may be apportioned by such method as is just and reasonable in the circumstances.

Exemption for sales of going concerns

784

(1) This section applies if a capital amount is obtained from the disposal—

(a) of assets (including any goodwill) of a profession or vocation,

(b) of a share in a partnership which is carrying on a profession or vocation, or

(2) An individual is not liable to income tax under this Chapter in respect of the capital amount so far as the going concern condition is met (see subsections (4) and (5)).

(3) Subsection (2) is subject to section 785 (restriction on exemption: sales of future earnings).

(4) In the case of a disposal within subsection (1)(a) or (b), the going concern condition is that the value of what is disposed of at the time of disposal is attributable to the value of the profession or vocation as a going concern.

(5) In the case of a disposal within subsection (1)(c), the going concern condition is that the value of what is disposed of at the time of disposal is attributable to the value of the company's business as a going concern.

(6) In subsection (5) the reference to the company's business includes a reference to the business of any other company in which it holds shares directly or indirectly.

Restriction on exemption: sales of future earnings

785

(1) This section applies if the value as a going concern mentioned in section 784(4) or (5) is derived to a material extent from prospective income or receipts derived directly or indirectly from the individual's activities in the occupation.

(2) The exemption under section 784 applies to the value so derived only if the future earnings condition is met.

(3) The future earnings condition is met if, ignoring all capital amounts, the individual will receive full consideration for the prospective income or receipts, whether as a partner in a partnership or as an employee or otherwise.

(4) The references in subsections (1) and (3) to income or receipts include references to payments for any description of copyright, licence, franchise or other right deriving its value from the individual's activities (including past activities).

Recovery of tax

Recovery of tax where consideration receivable by person not assessed

786

(1) This section applies if a person (“A”) is assessed to tax under this Chapter in respect of consideration receivable by another person (“B”).

(2) Consideration is not regarded as having become receivable by B for this purpose until B can effectively enjoy or dispose of it.

(3) A is entitled to recover from B any part of the tax which A has paid.

(4) If any part of the tax remains unpaid at the end of the period of 6 months beginning with the date when it became due and payable, it is recoverable from B as if B were the person assessed.

(5) Subsection (4) does not affect the right to recover the tax from A.

(6) For the purposes of this section, any income which an individual is treated as having as a result of this Chapter (the “occupation income”) is treated as the highest part of the individual's total income.

(7) But if in the tax year—

(a) more than one capital amount is treated as the individual's occupation income, or

(b) the individual is also treated as having income as a result of Chapter 3 (transactions in land),

only a just and reasonable proportion of each capital amount treated as occupation income is to be treated as the highest part of the individual's total income.

(8) See section 1012 for the relationship between—

(a) the rules in subsections (6) and (7), and

(b) other rules requiring particular income to be treated as the highest part of a person's total income.

Recovery of tax: certificates of tax paid etc

787

(1) For the purposes of section 786(3), an officer of Revenue and Customs must, if requested to do so, produce a certificate specifying—

(a) the amount of income in respect of which tax has been paid, and

(b) the amount of tax paid.

(2) The certificate is conclusive evidence of any facts stated in it.

(3) See also section 944 (under which directions may be given for payments within this Chapter to non-UK residents to be subject to a duty to deduct income tax).

Power to obtain information

788

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation

Minor definitions

789

In this Chapter—

“company” includes any body corporate, and

“share” includes stock.

Chapter 5 — Avoidance involving trading losses

Introduction

Overview of Chapter

790

(1) This Chapter imposes charges to income tax on—

(a) individuals who are treated as receiving income under section 792 (individuals in partnership claiming excess relief),

(b) individuals who are treated as receiving income under section 797 (individuals claiming relief for film-related trading losses), and

(c) individuals who are treated as receiving income under section 805 (individuals in partnership claiming relief for licence-related trading losses).

(2) The charges apply if (among other things) the individual makes a loss in a trade for which the individual claims sideways relief or capital gains relief.

(3) For the purposes of this Chapter sideways relief is—

(a) trade loss relief against general income (see sections 64 to 70), or

(b) early trade losses relief (see sections 72 to 74).

(4) For the purposes of this Chapter—

(a) capital gains relief is, in relation to a loss, the treatment of the loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and

(b) capital gains relief is claimed for a loss when a claim under that section is made in relation to the loss.

(5) References in this Chapter to a firm are to be read in the same way as references to a firm in Part 9 of ITTOIA 2005 (which contains special provision about partnerships).

Individuals in partnership: recovery of excess relief

Charge to tax on income treated as received under section 792

791

(1) Income tax is charged on income treated as received by an individual under section 792.

(2) Tax is charged under this section on the amount of the income treated as received in the tax year.

(3) The person liable for any tax charged under this section is the individual treated as receiving the income.

Partners claiming excess sideways or capital gains relief

792

(1) This section applies if—

(a) an individual carrying on a trade (“the relevant trade”) as a partner in a firm makes post-1 December 2004 losses in the relevant trade for which the individual claims relief within subsection (2),

(b) any of sections 104, 107 and 110 applies in relation to the relief (whether or not any of those sections restricts the amount of the relief), and

(2) The relief within this subsection is—

(a) sideways relief but only if the whole or part of the relief is claimed against income of the individual apart from profits of the relevant trade, and

(b) capital gains relief.

(3) A chargeable event occurs whenever—

(a) the amount of the individual's contribution to the firm is reduced as a result of the application of regulations made under section 114, and

(b) that reduction in the individual's contribution to the firm immediately results in—

(i) the total amount of trade losses claimed (less any reclaimed relief) becoming greater than the contribution, or

(ii) an increase in the amount by which the total amount of trade losses claimed (less any reclaimed relief) exceeds the contribution.

(4) The individual is treated as receiving an amount of income every time a chargeable event occurs.

The income is treated as arising otherwise than as profits of a trade.

(5) The amount of the income is calculated in accordance with section 793.

(6) If—

(a) the firm is carrying on, or has carried on, more than one trade, and

(b) subsection (1)(a) and (b) applies in relation to losses made by the individual in one or more of those trades as a partner in the firm,

the firm's trades are taken together for the purpose of determining whether a chargeable event occurs at any time after a claim in relation to any of those losses has been made and, if one does occur, the amount of income treated as received by the individual at that time.

See section 794(6) for modifications giving effect to this.

(7) References in this section to an individual being a partner in a firm include a reference to an individual being a limited partner within the meaning of section 103A as a result of subsection (1)(c) of that section.

(8) And, accordingly, in the case of an individual who is such a limited partner, in this section and in sections 793 to 795 references to the individual's firm are references to the relationship between the individual and the other persons mentioned in section 103A(3)(a).

Calculating the amount of income treated as received

793

(1) The amount of income treated as received by the individual under section 792 when the chargeable event occurs is the lowest of amounts A to C.

(2) Amount A is the amount by which the individual's contribution to the firm is reduced as a result of the application of regulations made under section 114.

(3) Amount B is the amount given by—

(a) taking, at the time immediately after the chargeable event occurs, the total amount of trade losses claimed that are post-1 December 2004 losses, and

(b) reducing that amount (but not below nil) by any reclaimed relief.

(4) Amount C is the amount given by—

(a) taking the amount by which, at the time immediately after the chargeable event occurs, the total amount of trade losses claimed exceeds the individual's contribution to the firm, and

(b) reducing that amount (but not below nil) by any reclaimed relief.

Meaning of “the total amount of trade losses claimed” etc

794

(1) In sections 792 and 793 “the total amount of trade losses claimed” means the total amount of losses within subsection (2) for which the individual has claimed sideways relief or capital gains relief.

(2) The losses within this subsection are losses made by the individual in the relevant trade—

(a) in a tax year at a time during which the individual carries on the relevant trade as a limited partner or as a member of an LLP, or

(b) in an early tax year during which the individual carries on the relevant trade as a non-active partner.

Expressions used in this subsection are to be read as if contained in Chapter 3 of Part 4.

(3) In sections 792 and 793 “reclaimed relief” means the total amount of income treated as received by the individual under section 792 as a result of that section being previously applied in relation to claims for relief for losses made by the individual in the relevant trade.

(4) In sections 792 and 793 “the individual's contribution to the firm” at any time means the individual's contribution to the firm or the LLP (as the case may be) at that time as calculated for the purposes of the relevant restriction provision.

(5) The “relevant restriction provision” means—

(a) whichever of sections 104, 107 and 110 applied as mentioned in section 792(1)(b), or

(b) if more than one of those sections applied as mentioned in section 792(1)(b), the section which so applied to the amount of relief which could be given for the loss most recently made by the individual in the relevant trade.

(6) In a case to which section 792(6) applies, for the purpose of determining the total amount of trade losses claimed, the amount of the reclaimed relief and the relevant restriction provision—

(a) apply subsections (1) and (2) in relation to each of the trades that the firm is carrying on, or has carried on, and then add the results together, and

(b) apply subsections (3) and (5)(b) as if references to the relevant trade were references to any of the trades that the firm is carrying on, or has carried on.

But if a trade is of the kind mentioned in section 110(8), do not apply subsection (2)(b) in relation to it.

Meaning of “post-1 December 2004 loss”

795

(1) For the purposes of sections 792 and 793 a “post-1 December 2004 loss” means—

(a) any loss made by an individual in a trade in a tax year ... which begins on or after 2 December 2004, or

(b) the post-1 December 2004 part of any loss made by an individual in a trade in a tax year ... which includes 2 December 2004 (but begins before that date).

(2) The “post-1 December 2004 part” of any loss made by an individual in a trade means the individual's share of any losses made by the relevant firm in the trade in the period—

(a) beginning with 2 December 2004, and

(b) ending with the end of ... the tax year concerned.

(3) For this purpose “the relevant firm” means the firm in which the individual carried on the trade, and—

(a) the losses of that firm are calculated as if that period were one for which profits and losses had to be calculated for the purposes of section 849 of ITTOIA 2005 (calculation of firm's profits or losses), and

(b) the individual's share of the losses is determined in accordance with the individual's interest in the firm during that period.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charge to tax on income treated as received under section 797

796

(1) Income tax is charged on income treated as received by an individual under section 797.

(2) Tax is charged under this section on the amount of the income treated as received in the tax year.

(3) The person liable for any tax charged under this section is the individual treated as receiving the income.

797

(1) This section applies if—

(a) an individual makes a film-related loss (see section 800) in a trade for which the individual claims sideways relief or capital gains relief (a “relevant claim”),

(b) there is a disposal of a right of the individual to profits arising from the trade (a “relevant disposal”) (see section 799), and

(2) An exit event occurs whenever—

(a) the individual receives any non-taxable consideration (see section 798) for a relevant disposal, or

(b) an increase in the individual's claimed film-related losses (see section 800) or a decrease in the individual's capital contribution (see section 801) results in—

(i) those losses becoming greater than that contribution, or

(ii) an increase in the amount by which those losses exceed that contribution.

(3) The individual is treated as receiving an amount of income every time a chargeable event occurs.

The income is treated as arising otherwise than as profits of the trade.

(4) A chargeable event occurs whenever—

(a) the individual makes a relevant claim (if by that time a relevant disposal and an exit event have occurred),

(b) a relevant disposal occurs (if by that time an exit event has occurred and the individual has made a relevant claim), or

(c) an exit event occurs (if by that time a relevant disposal has occurred and the individual has made a relevant claim).

(5) The amount of income treated as received when a chargeable event occurs is equal to the sum of—

(a) the total amount or value of all non-taxable consideration received by the individual for relevant disposals, and

(b) the amount (if any) by which the individual's claimed film-related losses exceed the individual's capital contribution.

The calculation in this subsection is made immediately after the chargeable event occurs and is subject to section 803.

(6) For the purposes of this section it does not matter—

(a) if the individual (or anyone else) is still carrying on the trade when a chargeable event occurs, or

(b) if the individual receives both non-taxable and taxable consideration for a relevant disposal.

Meaning of “non-taxable consideration” etc

798

(1) This section applies for the purposes of section 797.

(2) Consideration is non-taxable if (apart from section 796) it is not chargeable to income tax.

(3) Non-taxable consideration from which a deduction within subsection (4) is made is treated as received free of the deduction.

(4) A deduction is within this subsection if it is in consideration of any person's agreeing to, or facilitating, any relevant disposal or exit event.

Meaning of “disposal of a right of the individual to profits” etc

799

(1) For the purposes of section 797 any reference to a disposal of a right of an individual to profits arising from a trade includes, in particular, any of events A to D.

(2) Event A is the disposal, giving up or loss by—

(a) the individual, or

(b) a firm in which the individual is a partner,

of a right arising from the trade to income (or any part of any income).

It does not matter if the right is disposed of, given up or lost as part of a larger disposal, giving up or loss.

(3) Event B is the disposal, giving up or loss of the individual's interest in a firm that carries on the trade (including the dissolution of the firm).

(4) Event C is a default in the payment of income to which—

(a) the individual, or

(b) a firm in which the individual is a partner,

has a right arising from the trade.

(5) Event D is a change in the individual's entitlement to any profits or losses arising from the trade the effect of which is that—

(a) the individual's share of any profits is reduced (including to nil), or

(b) the individual becomes entitled to a share, or a greater share, of any losses without becoming entitled to a corresponding share of profits.

(6) The changes covered by event D include cases where there is an agreement under which the individual is entitled—

(a) to a particular share of any profits or losses arising from the trade in a period (including a nil share), and

(b) to a different share of any such profits or losses in a succeeding period (including a nil share).

(7) In such cases the change in the individual's entitlement is treated for the purposes of section 797 as occurring at the beginning of the succeeding period.

800

(1) This section applies for the purposes of sections 797, 801 and 802.

(2) A loss is a “film-related loss” if the calculation of profits or losses that it results from is made in accordance with any provision of Chapter 9 of Part 2 of ITTOIA 2005.

(3) “The individual's claimed film-related losses” means—

(a) the total amount of film-related losses made by the individual in the trade so far as they are losses for which the individual has made a relevant claim, less

(b) the amount of any relevant recovered relief.

(4) “The amount of any relevant recovered relief” means—

(a) amount A, or

(b) if less, amount B.

(5) Amount A is the total amount of income treated as received by the individual under section 792 (recovery of excess relief) as a result of the application of that section in relation to claims for relief for losses made by the individual in the trade.

(6) Amount B is the total amount of film-related losses within subsection (7) for which the individual has made a relevant claim.

(7) A loss is within this subsection if it is made by the individual in the trade—

(a) in a tax year at a time during which the individual carries on the trade as a member of an LLP or as a limited partner, or

(b) in an early tax year during which the individual carries on the trade as a non-active partner.

(8) Expressions used in subsection (7) are to be read as if contained in Chapter 3 of Part 4.

(9) Subsection (10) applies if—

(a) the individual has made a relevant claim for a film-related loss made in the trade as a partner in a firm, and

(b) the firm is carrying on, or has carried on, more than one trade.

(10) For the purpose of determining the individual's claimed film-related losses—

(a) apply subsection (3)(a) in relation to each of the trades and then add the results together,

(b) apply subsection (5) as if the reference to the trade were a reference to any of the trades, and

Meaning of “capital contribution”

801

(1) This section applies for the purposes of section 797.

(2) The individual's capital contribution is the amount which the individual has contributed to the trade as capital less so much of that amount (if any) as is within subsection (6).

This is subject to subsection (3).

(3) If the individual has made a relevant claim for a film-related loss made in the trade as a partner in a firm, the individual's capital contribution is the amount which the individual has contributed to the firm as capital less so much of that amount (if any) as is within subsection (6).

(4) In particular, the individual's share of any profits of the firm is to be included for the purposes of subsection (3) in the amount which the individual has contributed to the firm as capital so far as that share has been added to the firm's capital.

(5) In subsection (4) the reference to profits are to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for income tax purposes).

(6) An amount of capital is within this subsection if it is an amount which—

(a) the individual has previously drawn out or received back,

(b) the individual is entitled to draw out or receive back,

(d) the individual is entitled to require another person to reimburse to the individual.

(7) But if a chargeable event occurs, anything treated for the purposes of section 797(5)(a) as consideration received by the individual for a relevant disposal is not to be treated as capital within subsection (6) in calculating the individual's capital contribution for the purposes of section 797(5)(b).

(8) In this section—

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Income Tax Act 2007

Meaning of “relevant transaction”

715

Meaning of “relevant transfer” and “transfer”

716

Meaning of “assets” etc

717

Meaning of “person abroad” etc

718

Meaning of “associated operation”

719

Charge where power to enjoy income

Charge to tax on income treated as arising under section 721

720

Individuals with power to enjoy income as a result of relevant transactions

721

When an individual has power to enjoy income of person abroad

722

The enjoyment conditions

723

Special rules where benefit provided out of income of person abroad

724

Reduction in amount charged where controlled foreign company involved

725

Non-domiciled individuals

726

Charge where capital sums received

Charge to tax on income treated as arising under section 728

727

Individuals receiving capital sums as a result of relevant transactions

728

The capital receipt conditions

729

Non-domiciled individuals

730

Charge where benefit received

Charge to tax on income treated as arising under section 732

731

Non-transferors receiving a benefit as a result of relevant transactions

732

Income charged under section 731

733

Reduction in amount charged: previous capital gains tax charge

734

Non-domiciled individuals

735

Exemptions: no tax avoidance purpose or genuine commercial transaction

Exemptions: introduction

736

Exemption: all relevant transactions post-4 December 2005 transactions

737

Meaning of “commercial transaction”

738

Exemption: all relevant transactions pre-5 December 2005 transactions

739

Exemption: relevant transactions include both pre-5 December 2005 and post-4 December 2005 transactions

740

Application of section 742 (partial exemption)

741

Partial exemption where later associated operations fail conditions

742

General

No duplication of charges

743

Meaning of taking income into account in charging income tax for section 743

744

Rates of tax applicable to income charged under sections 720 and 727 etc

745

Deductions and reliefs where individual charged under section 720 or 727

746

Amounts corresponding to accrued income profits and related interest

747

Supplementary

Power to obtain information

748

Restrictions on particulars to be provided by solicitors

749

Restrictions on particulars to be provided by banks

750

Special Commissioners' jurisdiction on appeals