Finance Act 2008

In section 446N (securities subject to restriction during relevant period), after subsection (6) insert—

(7) If any of the employment income arising under section 426 by virtue of the chargeable event is foreign securities income within the meaning of section 41C, reduce the taxable amount mentioned in subsection (5) by the amount of the foreign securities income. (8) If any of the employment income that would have arisen (if the non-commercial interests mentioned in subsection (6) had been disregarded) under section 426 by virtue of the chargeable event would have been foreign securities income (within that meaning), reduce the taxable amount mentioned in subsection (6) by the amount of the foreign securities income.

33

In section 474(1) (securities options: exclusions), for the words from “or 21” to the end substitute “ , 22 or 26 applies (earnings for year when employee UK resident). ”

34

In section 540(2) (EMI: taxable benefits), for the words from “or 21” to the end substitute “ applies (earnings for year when employee UK resident).& ”

35

In section 690 (PAYE: employee non-UK resident etc), after subsection (2) insert—

(2A) For the purposes of subsection (2) as it applies in relation to an employee who is UK resident but not ordinarily UK resident in a tax year, the officer may treat section 809B of ITA 2007 (remittance basis) as applying to the employee for that year, even if no claim under that section has been made.

36

In section 698 (PAYE: special charges on employment-related securities), after subsection (7) insert—

(8) This section is subject to section 700A (employment-related securities etc: remittance basis).

37

In section 700 (PAYE: gains from securities options), after subsection (6) insert—

(7) This section is subject to section 700A (employment-related securities etc: remittance basis).

38

After that section insert—

(700A) (1) This section applies if— (a) section 698 or 700 applies, and (b) part or all of the amount that counts as employment income is foreign securities income or is likely to be foreign securities income. (2) The amount of the payment treated under section 696 as made is limited to— (a) the amount that, on the basis of the best estimate that can reasonably be made, is likely to count as employment income, minus (b) the amount that, on the basis of such an estimate, is likely to be foreign securities income. (3) References in this section to “foreign securities income” are to income that is foreign securities income for the purposes of section 41A.

39

In section 721(1) (other definitions), for the definition of “foreign employer” substitute—

“foreign employer” means an individual, partnership or body of persons resident outside, and not resident in, the United Kingdom,

.

40

In Schedule 1 (index of defined expressions), omit the entries relating to—

• (a) receipt of money earnings (in Chapter 5 of Part 2), and

• (b) receipt of non-money earnings (in Chapter 5 of Part 2).

41

In paragraph 8 of Schedule 2 (approved share incentive plans: all-employee nature of plan), for sub-paragraph (2) substitute—

(2) An employee is a UK resident taxpayer if— (a) the employee's earnings from the employment by reference to which the employee meets the employment requirement are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), and (b) those general earnings are (or would be if there were any) earnings for a tax year in which the employee is ordinarily resident in the United Kingdom.

42

In paragraph 6(2) of Schedule 3 (approved SAYE option schemes: all-employee nature of scheme), for paragraph (c) substitute—

(c) E's earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), (ca) those general earnings are (or would be if there were any) earnings for a tax year in which E is ordinarily resident in the United Kingdom, and

.

43

In paragraph 27(2) of Schedule 5 (enterprise management incentives: meaning of “working time”)—

• (a) in paragraph (a), for the words from “or 21” to “Kingdom)” substitute “ applies (earnings for year when employee UK resident) ”, and

• (b) in paragraph (b), for the words from “resident and” to the end substitute “ UK resident (and none of sections 809B, 809D and 809E of ITA 2007 (remittance basis) applied to the employee). ”

44

In Schedule 7 (transitionals and savings), omit paragraphs 9 to 12.

Relevant foreign income

45

In section 575 of ITEPA 2003 (foreign pensions: taxable pension income), omit subsection (4).

46

ITTOIA 2005 is amended as follows.

47

In section 260(1) (overview of Part 3)—

• (a) at the end of paragraph (d) insert “ and ”, and

• (b) omit paragraph (f) (and the “and” before it).

48

In section 269 (territorial scope of charge to tax), omit subsections (3) and (4).

49

Omit Chapter 11 of Part 3 (overseas property income).

50

In section 829 (overview of Part 8), for paragraph (a) substitute—

(a) the charging of relevant foreign income of a person to whom section 809B, 809D or 809E of ITA 2007 applies (remittance basis),

.

51

• (1) Section 830 (meaning of “relevant foreign income”) is amended as follows.

• (2) In subsection (1), for the words from “which” to the end substitute

which— (a) arises from a source outside the United Kingdom, and (b) is chargeable under any of the provisions specified in subsection (2) (or would be so chargeable if section 832 did not apply to it).

• (3) In subsection (2), omit paragraph (d).

52

Omit section 831 (claims for relevant foreign income to be charged on remittance basis).

53

For section 832 substitute—

(832) (1) This section applies to an individual's relevant foreign income for a tax year (“the relevant foreign income”) if section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year. (2) For any tax year in which— (a) the individual is UK resident, and (b) any of the relevant foreign income is remitted to the United Kingdom, income tax is charged on the full amount of the relevant foreign income so remitted in that year. (3) Subsection (2) applies whether or not the source of the income exists when the income is remitted. (4) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. (832A) (1) This section applies if— (a) an individual satisfies the residence requirements for any tax year (“the year of return”), (b) the individual did not satisfy those requirements for one or more tax years immediately before the year of return but did satisfy those requirements for an earlier tax year, (c) there are fewer than 5 tax years between— (i) the last tax year before the year of return for which the individual satisfied those requirements (“the year of departure”), and (ii) the year of return, and (d) the individual satisfied those requirements for at least 4 out of the 7 tax years immediately before the year of departure. (2) Treat any of the individual's relevant foreign income within subsection (3) which is remitted to the United Kingdom after the year of departure and before the year of return as remitted to the United Kingdom in the year of return. (3) Relevant foreign income is within this subsection if— (a) it is for the year of departure or any earlier tax year, and (b) section 832 applies to it. (4) For the purposes of subsection (1) an individual “satisfies the residence requirements” for a tax year if— (a) at any time in that year, the individual is UK resident and not Treaty non-resident, or (b) the individual is ordinarily UK resident, and is not Treaty non-resident, for that year. (5) For the purposes of subsection (4) an individual is “Treaty non-resident” at any time if, at that time, he is regarded as resident in a territory outside the United Kingdom for the purposes of double taxation relief arrangements having effect at that time. (6) In subsection (5) “double taxation relief arrangements” means arrangements specified in an Order in Council making any such provisions as are referred to in section 788 of ICTA. (832B) (1) The only case in which deductions are allowed from the income mentioned in section 832(2) is where the income is from a trade, profession or vocation carried on outside the United Kingdom. (2) In that case the same deductions are allowed as are allowed under the Income Tax Acts where the trade, profession or vocation is carried on in the United Kingdom.

54

Omit sections 833 to 837.

Chargeable gains

55

TCGA 1992 is amended as follows.

56

• (1) Section 3 (annual exempt amount) is amended as follows.

• (2) After subsection (1) insert—

(1A) Subsection (1) does not apply to an individual for a tax year if section 809B of ITA 2007 (claim for remittance basis to apply) applies to the individual for that year.

• (3) In subsection (5C)—

• (a) after paragraph (a) insert—

(aa) if section 16ZB (certain chargeable gains charged on remittance basis) applies for that year, deducting the amount of the relevant gains (within the meaning of that section),

and

• (b) in paragraph (b), after “deducting” insert “ (from the amount mentioned in paragraph (a), as reduced under paragraph (aa)) ” .

57

In section 3A (reporting limits), after subsection (5) insert—

(5A) Subsection (1) does not apply to an individual for a tax year if— (a) section 809B of ITA 2007 (claim for remittance basis to apply), or (b) section 16ZB below (certain chargeable gains charged on remittance basis), applies to the individual for that year.

58

In section 9 (residence etc), omit subsection (2).

59

In section 10A (temporary non-residents), after subsection (9) insert—

(9ZA) If— (a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the taxpayer for the year of return, and (b) the taxpayer is not domiciled in the United Kingdom in that year, any foreign chargeable gains falling within subsection (2)(a) which were remitted in an intervening year are treated as remitted in the year of return. For this purpose “foreign chargeable gains” has the meaning given by section 12(4).

60

For section 12 substitute—

(12) (1) This section applies to foreign chargeable gains accruing to an individual in a tax year (“the foreign chargeable gains”) if— (a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year, and (b) the individual is not domiciled in the United Kingdom in that year. (2) Chargeable gains are treated as accruing to the individual in any tax year in which any of the foreign chargeable gains are remitted to the United Kingdom. (3) The amount of chargeable gains treated as accruing is equal to the full amount of the foreign chargeable gains so remitted in that year. (4) In this section “foreign chargeable gains” means chargeable gains accruing from the disposal of an asset which is situated outside the United Kingdom. (5) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

61

In section 16 (computation of losses), omit subsection (4).

62

After that section insert—

(16ZA) (1) In this section “the relevant tax year”, in relation to an individual, means the first tax year for which— (a) section 809B of ITA 2007 (claim for remittance basis) applies to the individual, and (b) the individual is not domiciled in the United Kingdom. (2) An individual may make an election under this section for the relevant tax year (in which case sections 16ZB and 16ZC have effect in relation to the individual for the relevant tax year and all subsequent tax years). (3) If an individual does not make such an election, foreign losses accruing to the individual in— (a) the relevant tax year, or (b) any subsequent tax year except one in which the individual is domiciled in the United Kingdom, are not allowable losses. (4) Sections 42 and 43 of the Management Act (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to an election under this section as they apply in relation to a claim for relief. (5) An election under this section is irrevocable. (6) In this section “foreign loss” means a loss accruing from the disposal of an asset situated outside the United Kingdom. (16ZB) (1) This section applies to an individual for a tax year (“the applicable tax year”) if— (a) the individual has made an election under section 16ZA, (b) foreign chargeable gains accrued to the individual in or after the relevant tax year (within the meaning of section 16ZA) but before the applicable tax year, and (c) by reason of the remission of any of the foreign chargeable gains to the United Kingdom, chargeable gains are treated under section 12 as accruing to the individual in the applicable tax year (“the relevant gains”). (2) Section 2(2) or (4) has effect for the applicable tax year as if the relevant gains had not accrued. (3) The amount on which the individual is charged to capital gains tax for the applicable tax year is (instead of the amount given by section 2(2) or (4)(b), as reduced under section 3) the sum of— (a) the adjusted taxable amount, and (b) the amount of the relevant gains. (4) “The adjusted taxable amount” is— (a) if section 3(1) (annual exempt amount) does not apply to the individual for the applicable tax year, the amount given by section 2(2) or (4)(b) as it has effect by virtue of subsection (2), and (b) otherwise, so much of that amount as exceeds the exempt amount for the applicable tax year (within the meaning of section 3). (5) In subsection (1) “foreign chargeable gains” has the meaning given by section 12(4). (6) For the purposes of subsection (1)(c) foreign chargeable gains are remitted to the United Kingdom if they are regarded as so remitted for the purposes of section 12. (16ZC) (1) This section applies to an individual for a tax year if— (a) the individual has made an election under section 16ZA for the tax year or any earlier tax year, (b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the tax year, and (c) the individual is not domiciled in the United Kingdom in the tax year. (2) The following steps apply for the purpose of calculating the amount on which the individual is to be charged to capital gains tax for the tax year. Step 1 Deduct any relevant allowable losses from the chargeable gains referred to in subsection (3) in the order in which they appear there (starting with paragraph (a) of that subsection). If allowable losses are deductible from the chargeable gains referred to in subsection (3)(b) but are not enough to exhaust them all— (a) those chargeable gains are to be ordered according to the day on which they accrued, (b) the losses are to be deducted from those gains in reverse chronological order (starting with the last chargeable gain to accrue), and (c) if allowable losses are deductible from chargeable gains that accrued on a particular day but are not enough to exhaust all of the chargeable gains that accrued on that day, the amount deducted from each of those chargeable gains is the appropriate proportion of the losses. In paragraph (c) “the appropriate proportion”, in relation to a chargeable gain, is the amount of that gain divided by the total amount of the chargeable gains that accrued on the day in question. Step 2 Treat the amount referred to in section 2(2) or (4)(a) or 16ZB(3)(a) as being equal to— (a) the amount it would be if there were no relevant allowable losses, minus (b) the total amount deducted under Step 1 from chargeable gains within subsection (3)(a) or (c). (3) The chargeable gains are— (a) foreign chargeable gains accruing to the individual in the tax year, to the extent that they are remitted to the United Kingdom in that year, (b) foreign chargeable gains accruing to the individual in that year, to the extent that they are not so remitted in that year, and (c) chargeable gains accruing to the individual in that year (other than foreign chargeable gains). (4) Chargeable gains treated as accruing under section 87 or 89(2) (read, where appropriate, with section 10A) are not within any paragraph of subsection (3). (5) Chargeable gains treated as accruing under section 12 are not within subsection (3)(c). (6) For the purposes of subsection (3) foreign chargeable gains are remitted to the United Kingdom if they are regarded as so remitted for the purposes of section 12. (7) In this section— - “relevant allowable losses” means the allowable losses that section 2(2) provides may be deducted from chargeable gains accruing to the individual in the tax year, and - “foreign chargeable gains” has the meaning given by section 12(4). (16ZD) (1) This section applies if section 16ZC applies to an individual for a tax year. (2) Any allowable loss deducted under step 1 of section 16ZC(2) is to be regarded (for the purposes of section 2(2)(b)) as allowed as a deduction from chargeable gains accruing to the individual in the tax year. (3) If a deduction is made under step 1 of section 16ZC(2) from a foreign chargeable gain within section 16ZC(3)(b), the amount of the foreign chargeable gain is reduced by the amount deducted.

63

In section 119A (increase in expenditure by reference to tax charged in relation to employment-related securities), after subsection (5) insert—

(5A) See also section 119B (unremitted foreign securities income).

64

After that section insert—

(119B) (1) For the purposes of section 119A reduce the amount that counts as employment income by so much of that amount (if any) as is unremitted foreign securities income. (2) In this section “unremitted foreign securities income” means income that— (a) is foreign securities income for the purposes of section 41A of ITEPA 2003 (employment income from ERS charged on remittance basis), and (b) has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs. (3) The following provisions apply if any of the unremitted foreign securities income is remitted to the United Kingdom after the end of the tax year referred to in subsection (2)(b). (4) The person liable for the capital gains tax on any chargeable gains arising on the disposal may make a claim for section 119A(2) to have effect as if the remitted income had been remitted before the end of that tax year. (5) All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to a claim under subsection (4). (6) Those adjustments may be made at any time, despite anything to the contrary in any enactment relating to capital gains tax.

Minor and consequential amendments

65

In section 33(2A) of TMA 1970 (error or mistake)—

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

• (b) at the end of paragraph (b) insert

, or (c) an error or mistake consisting of the making of a claim under section 809B of ITA 2007 (claim for remittance basis).

66

ITTOIA 2005 is amended as follows.

67

In section 839 (annual payments payable out of relevant foreign income), omit subsection (6).

68

In section 840 (relief for backdated pensions charged on arising basis), omit subsection (4) (application of section 837).

69

After that section insert—

(840A) (1) A claim under section 840 must be made on or before the fifth anniversary of the normal self-assessment filing date for the tax year for which the relief is claimed. (2) All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to section 840. (3) Those adjustments may be made at any time, despite anything to the contrary in the Income Tax Acts. (4) A person's personal representatives may make any claim under section 840 which the person might have made. (5) If a person dies— (a) any tax paid by the person and repayable because of a claim under section 840 is to be repaid to the personal representatives, and (b) the person's personal representatives are liable for any additional tax which arises because of a claim under that section. (6) If subsection (5)(b) applies, the additional tax— (a) is to be assessed on the personal representatives, and (b) is a debt due and payable out of the estate.

70

• (1) Section 857 (partners to whom the remittance basis may apply) is amended as follows.

• (2) In subsection (1), for paragraph (c) substitute—

(c) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to a partner for a tax year.

• (3) In subsection (3), omit “for the purposes of this Act (see Part 8)”.

• (4) Accordingly, in the heading, for “may apply” substitute “ applies ”.

71

In section 878 (definitions), omit subsection (2).

72

In Schedule 2 (transitional provision etc), omit paragraphs 150 and 151.

73

In Part 2 of Schedule 4 (index of defined expressions), omit the entry for “person to whom the remittance basis applies”.

74

ITA 2007 is amended as follows.

75

In section 2(14) (overview of Act), before paragraph (a) insert—

(za) an alternative basis for charge (the remittance basis) for certain income and gains of certain individuals (Chapter A1),

.

76

In section 34 (personal allowances etc: introduction), after subsection (2) insert—

(3) For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to personal allowance or blind person's allowance).

77

In section 42 (tax reductions for married couples etc: introduction), after subsection (4) insert—

(5) For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to tax reduction).

78

In section 460 (residence etc of claimants for relief for life insurance payments etc), after subsection (3) insert—

(4) For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement under section 457, 458 or 459).

79

In consequence of the amendments made by this Part of this Schedule, omit—

• (a) in ITEPA 2003, paragraph 208 of Schedule 6,

• (b) in ITTOIA 2005, paragraph 429 of Schedule 1, and

• (c) in CRCA 2005, paragraphs 102(3)(b) to (d) and 104 of Schedule 4.

Commencement

80

The amendments made by paragraphs 3(3), 4(3), 5(2), 22, 31 to 33, 38 and 64 have effect in relation to employment-related securities and employment-related securities options where the date of the acquisition is on or after 6 April 2008 (except employment-related securities acquired pursuant to a securities option acquired before 6 April 2008).

81

The other amendments made by this Part of this Schedule have effect for the tax year 2008-09 and subsequent tax years.

Transitional provision

82

• (1) This paragraph applies in relation to an individual's general earnings for the tax year 2007-08 or any earlier tax year (“the relevant tax year”) if the individual—

• (a) was UK resident in that year, but

• (b) was not domiciled in the United Kingdom, or was not ordinarily UK resident, in that year.

• (2) Section 22 or 26 of ITEPA 2003 (as amended by this Part of this Schedule) applies in relation to the general earnings as if—

• (a) section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year, and

• (b) section 22(7) or 26(6) of ITEPA 2003 were omitted.

• (3) In relation to the general earnings, the definition of “foreign employer” in section 721(1) of ITEPA 2003 has effect as if at the end there were inserted “ and not resident in the Republic of Ireland ”.

83

• (1) This paragraph applies to an individual's relevant foreign income for the tax year 2007-08 or any earlier tax year (“the relevant tax year”) if—

• (a) the individual made a claim under section 831 of ITTOIA 2005 for the relevant tax year, or

• (b) section 65(5) of ICTA (or any earlier superseded enactment corresponding to that provision) applied in relation to the individual for the relevant tax year.

• (2) Section 832 of ITTOIA 2005 (as amended by this Part of this Schedule) applies in relation to the relevant foreign income as if section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year.

• (3) But nothing in section 832 of ITTOIA 2005 applies in relation to any of the relevant foreign income that arose in the Republic of Ireland.

• (4) Nothing in section 832A of that Act applies in relation to anything remitted to the United Kingdom in the tax year 2007-08 or any earlier tax year.

84

• (1) This paragraph applies if section 12 of TCGA 1992 (or any corresponding superseded enactment) applied in relation to a gain accruing to an individual in the tax year 2007-08 or any earlier tax year (“the relevant tax year”).

• (2) Section 12 of TCGA 1992 (as amended by this Part of this Schedule) applies in relation to that gain as if section 809B of ITA 2007 (claim for remittance basis to apply) applied to the individual for the relevant tax year.

• (3) Nothing in section 10A of TCGA 1992 applies in relation to any part of the gain remitted to the United Kingdom in the tax year 2007-08 or any earlier tax year.

85

• (1) In section 809E(3)(b) of ITA 2007, the reference to a tax year for which section 809B, 809D or 809E of that Act applies to an individual includes a tax year (not later than the tax year 2007-08) in which the individual—

• (a) was UK resident, but

• (b) was not domiciled in the United Kingdom or was not ordinarily UK resident.

• (2) In relation to such a tax year, the reference there to the individual's foreign income and gains includes the individual's relevant foreign income if (and only if)—

• (a) the individual made a claim under section 831 of ITTOIA 2005 for the year, or

• (b) section 65(5) of ICTA (or any earlier superseded enactment corresponding to that provision) applied in relation to the individual for the year.

86

• (1) Section 809L of ITA 2007 (meaning of “remitted to the United Kingdom”) has effect subject to this paragraph.

• (2) If, before 6 April 2008, property (including money) consisting of or deriving from an individual's relevant foreign income was brought to or received or used in the United Kingdom by or for the benefit of a relevant person, treat the relevant foreign income as not remitted to the United Kingdom on or after that date (if it otherwise would be regarded as so remitted).

• (3) If, before 12 March 2008, property (other than money) consisting of or deriving from an individual's relevant foreign income was acquired by a relevant person, treat the relevant foreign income as not remitted to the United Kingdom on or after 6 April 2008 (if it otherwise would be regarded as so remitted).

• (4) Subject to sub-paragraphs (2) and (3), in relation to an individual's income and chargeable gains for the tax year 2007-08 or any earlier tax year, section 809L has effect as if the references to a relevant person were to the individual.

• (4A) For the purposes of sub-paragraph (4), section 648(2) to (5) of ITTOIA 2005 (and corresponding earlier enactments) do not apply (so that relevant foreign income which arose under a settlement in the tax year 2007-08 or any earlier tax year is to be treated as income for the tax year in which it arose).

• (5) “Money” has the same meaning as in section 809Y of ITA 2007.

87

Section 809N of ITA 2007 (section 809L: gift recipients, qualifying property and enjoyment) has effect in relation to an individual's income and chargeable gains for the tax year 2007-08 or any earlier tax year as if—

• (a) the reference in subsection (2) to a relevant person were to the individual,

• (b) subsections (3) and (4) were omitted, and

• (c) the references in subsection (9) to a relevant person, all relevant persons, or relevant persons were to the individual.

88

Section 809O of ITA 2007 (section 809L: dealings where there is a connected operation) has effect in relation to an individual's income and chargeable gains for the tax year 2007-08 or any earlier tax year as if—

• (a) subsection (2) were omitted, and

• (b) the references in subsections (4) and (6) to a relevant person, all relevant persons, or relevant persons were to the individual.

89

Sections 809Q to 809S of ITA 2007 (transfers from mixed funds) do not apply for the purposes of determining whether income or chargeable gains for the tax year 2007-08 or any earlier tax year are remitted to the United Kingdom (or the amount of any such income or chargeable gains so remitted).

90

• (1) This paragraph applies if—

• (a) before 12 March 2008, money was lent to an individual outside the United Kingdom,

• (b) the loan was made for the purpose of enabling the individual to acquire an interest in residential property in the United Kingdom (and for no other purpose), and

• (c) before 6 April 2008—

• (i) the money was received in the United Kingdom,

• (ii) the individual used the money to acquire an interest in residential property in the United Kingdom (“the interest”), and

• (iii) repayment of the debt for the money (“the debt”), or of payments made under a guarantee of that repayment (“the guarantee”), was secured on the interest.

• (2) Relevant foreign income of the individual used outside the United Kingdom before 6 April 2028 to pay interest on the debt is treated as not remitted to the United Kingdom.

• (3) If, at any time on or after 12 March 2008—

• (a) any term upon which the loan was made, or any term of the guarantee, is varied or waived,

• (b) repayment of the debt, or of payments made under the guarantee, ceases to be secured on the interest,

• (c) repayment of any other debt is secured on the interest or is guaranteed by the guarantee, or

• (d) the interest ceases to be owned by the individual,

sub-paragraph (2) does not apply in relation to relevant foreign income used as mentioned there after that time.

• (4) If—

• (a) before 12 March 2008, money was lent to the individual outside the United Kingdom (“the subsequent loan”),

• (b) the subsequent loan was made for the purpose of enabling the individual to repay—

• (i) the loan mentioned in sub-paragraph (1), or

• (ii) another loan in relation to which sub-paragraphs (2) and (3) apply (by virtue of this sub-paragraph),

and for no other purpose, and

• (c) before 6 April 2008—

• (i) the individual used the money to repay the loan referred to in paragraph (b)(i) or (ii), and

• (ii) repayment of the subsequent loan, or of payments made under a guarantee of that repayment, was secured on the interest,

sub-paragraphs (2) and (3) apply in relation to the subsequent loan (and for this purpose references there to the debt or the loan are to be read as references to the subsequent loan).

• (5) In this paragraph “residential property” has the same meaning as in Part 4 of FA 2003 (see section 116 of that Act).

• (6) In this paragraph “guarantee” includes an indemnity, and “guaranteed” is to be read accordingly.

91

• (1) This paragraph applies in relation to employment-related securities if—

• (a) the date of the acquisition is on or after 6 April 2008 and on or before 31 July 2008, and

• (b) Chapter 2 of Part 7 of ITEPA 2003 (restricted securities) applies in relation to the securities by virtue only of amendments made by this Schedule.

• (2) Section 431 of ITEPA 2003 (election for full or partial disapplication of Chapter) has effect in relation to the employment-related securities as if in subsection (5)(b) for “more than 14 days after the acquisition” there were substituted “ after 14 August 2008 ”.

Part 2 — Non-resident companies and trusts etc

Offshore income gains

92

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

93

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

94

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

95

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96

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

97

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

98

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

99

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

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101

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102

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

Attribution of gains to members of non-resident companies

103

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

After section 14 of that Act insert—

(14A) (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

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

106

TCGA 1992 is amended as follows.

107

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

For section 87 substitute—

(87) (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) (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) (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) (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.

• (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.

• (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

For section 90 substitute—

(90) (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) (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.

• (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

Omit sections 92 to 95 (matching).

114

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

115

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

116

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

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—

• (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

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.

• (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.

• (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.

• (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

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—

• (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—

• (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—

• (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—

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

• (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—

• (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—

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

• (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

128

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.

• (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

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

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

132

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

After that paragraph insert—