Finance Act 2013

• (4) In subsection (3), after “the earnings” insert “ (or, in a case within subsection (1A), the part of the earnings that is not “excluded”) ”.

65

• (1) Section 394 (charge on employer-financed retirement benefits) is amended as follows.

• (2) In subsection (4C), omit “or” at the end of paragraph (b) and after that paragraph insert—

(ba) an amount which would count as employment income of the employee or former employee under that Chapter but for the application of section 554Z5 (overlap with earlier relevant step), or

.

• (3) In that subsection, for paragraph (c) substitute—

(c) an amount which would be within paragraph (a), (b) or (ba) apart from— (i) the employee or former employee having been non-UK resident for any tax year, or (ii) any tax year having been a split year as respects the employee or former employee.

66

• (1) Section 421E (income relating to securities: exclusions about residence etc) is amended as follows.

• (2) For subsection (1) substitute—

(1) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in a tax year that is not a split year as respects the employee and— (a) the earnings from the employment for that tax year are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or (b) had there been any earnings from the employment for that tax year, they would not have been general earnings to which any of those sections applied. (1A) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in the UK part of a tax year that is a split year as respects the employee and— (a) the earnings from the employment attributable to that part of the year are not general earnings to which section 15, 22 or 26 applies, or (b) had there been any earnings from the employment attributable to that part of the year, they would not have been general earnings to which any of those sections applied. (1B) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in the overseas part of a tax year that is a split year as respects the employee.

• (3) After subsection (2) insert—

(2A) But Chapters 3A to 3D do apply in relation to employment-related securities in relation to which they are disapplied by subsection (2) if— (a) the acquisition takes place in the overseas part of a tax year that is a split year as respects the employee, (b) the tax year is a split year because the circumstances of the case fall within Case 1, Case 2 or Case 3 as described in Part 3 of Schedule 45 to FA 2013 (split year treatment: cases involving actual or deemed departure from the United Kingdom), and (c) had it not been a split year— (i) the earnings from the employment for that tax year (or some of them) would have been general earnings to which section 15, 22 or 26 applied, or (ii) if there had been any earnings from the employment for that tax year, they (or some of them) would have been general earnings to which any of those sections applied.

67

In section 474 (cases where Chapter 5 of Part 7 does not apply), for subsection (1) substitute—

(1) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in a tax year that is not a split year as respects the employee and— (a) the earnings from the employment are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or (b) had there been any earnings from the employment, they would not have been general earnings to which any of those sections applied. (1A) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in the UK part of a tax year that is a split year as respects the employee and— (a) the earnings from the employment attributable to that part of the year are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or (b) had there been any earnings from the employment attributable to that part of the year, they would not have been general earnings to which any of those sections applied. (1B) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in the overseas part of a tax year that is a split year as respects the employee.

68

• (1) Section 554Z4 (residence issues) is amended as follows.

• (2) For subsections (3) to (5) substitute—

(3) Subsection (4) applies if the value of the relevant step, or a part of it, is “for”— (a) a tax year for which A is non-UK resident, or (b) a tax year that is a split year as respects A. (4) The value, or the part of it, is to be reduced— (a) in a case within subsection (3)(a), by so much of the value, or the part of it, as is not in respect of UK duties, and (b) in a case within subsection (3)(b), by so much of the value, or the part of it, as is both— (i) attributable to the overseas part of the tax year, and (ii) not in respect of UK duties. (5) The extent to which— (a) the value, or the part of it, is not in respect of UK duties, or (b) so much of the value, or the part of it, as is attributable to the overseas part of the tax year is not in respect of UK duties, is to be determined on a just and reasonable basis.

• (3) After subsection (5) insert—

(5A) Any attribution required for the purposes of subsection (4)(b)(i) is to be done on a just and reasonable basis. (5B) “UK duties” means duties performed in the United Kingdom.

69

In section 554Z6 (overlap with certain earnings), in subsection (1)(a), after “UK resident” insert “ (and, in the case of a tax year that is a split year as respects A, are not “excluded” by virtue of section 15(1A)(a) and (b)(i)) ”.

70

In section 554Z9 (remittance basis: A is ordinarily UK resident), in subsection (5)—

• (a) in paragraph (b), after “that income” insert “ (or of so much of it as is attributable to the UK part of the relevant tax year, if it was a split year as respects A) ”, and

• (b) in paragraph (c), after “tax year” insert “ (or the UK part of it) ”.

71

• (1) Section 554Z10 (remittance basis: A is not ordinarily resident) is amended as follows.

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

(a) the value of the relevant step, or a part of it, is “for” a tax year (“the relevant tax year”) as determined under section 554Z4,

.

• (3) For subsection (2) substitute—

(2) The overseas portion of (as the case may be)— (a) A's employment income by virtue of section 554Z2(1), or (b) the relevant part of A's employment income by virtue of that section, is “taxable specific income” in a tax year so far as the overseas portion is remitted to the United Kingdom in that year.

• (4) After that subsection insert—

(2A) The overseas portion” of A's employment income by virtue of section 554Z2(1), or of the relevant part of that income, is so much of that income, or of the relevant part of it, as is not in respect of UK duties. (2B) “UK duties” means duties performed in the United Kingdom.

• (5) In subsection (3), for “this purpose” substitute “ the purposes of this section ”.

• (6) For subsection (4) substitute—

(4) The extent to which— (a) the employment income, or the relevant part of it, is not in respect of UK duties, or (b) so much of the employment income, or of the relevant part of it, as is attributable to the UK part of the relevant tax year is not in respect of UK duties, is to be determined on a just and reasonable basis.

Special charging rules for pension income

72

• (1) Section 575 of ITEPA 2003 (foreign pensions: taxable pension income) is amended as follows.

• (2) In subsection (1), after “subsections” insert “ (1A), ”.

• (3) After that subsection insert—

(1A) If the person liable for the tax under this Part is an individual and the tax year is a split year as respects that individual, the taxable pension income for the tax year is the full amount of the pension income arising in the UK part of the year, subject to subsections (2) and (3) and section 576A.

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

PAYE income

73

• (1) Section 690 of ITEPA 2003 (employee non-residents etc) is amended as follows.

• (2) In subsection (1), omit “only”.

• (3) After that subsection insert—

(1A) This section also applies in relation to an employee in a tax year if it appears to an officer of Revenue and Customs that— (a) the tax year is likely to be a split year as respects the employee, and (b) the employee works or will work in the United Kingdom and also works or is likely to work outside the United Kingdom.

Special charging rules for trading income

74

ITTOIA 2005 is amended as follows.

75

In section 6 (territorial scope of charge to tax), after subsection (2) insert—

(2A) If the tax year is a split year as respects a UK resident individual, this section has effect as if, for the overseas part of that year, the individual were non-UK resident.

76

• (1) Section 17 (effect of becoming or ceasing to be UK resident) is amended as follows.

• (2) For subsection (1) substitute—

(1) This section applies if— (a) an individual carries on a trade otherwise than in partnership, and (b) there is a change of residence. (1A) For the purposes of this section there is a “change of residence” if— (a) the individual becomes or ceases to be UK resident, or (b) a tax year is, as respects the individual, a split year. (1B) The change of residence occurs— (a) in a case falling within subsection (1A)(a), at the start of the tax year for which the individual becomes or ceases to be UK resident, and (b) in a case falling within subsection (1A)(b), at the start of whichever of the UK part or the overseas part of the tax year is the later part.

• (3) In subsection (2), at the beginning insert “ If this section applies and the individual does not actually cease permanently to carry on the trade immediately before the change of residence occurs, ”.

77

In section 243 (post-cessation receipts: extent of charge to tax), after subsection (5) insert—

(6) If the tax year is a split year as respects a UK resident individual, this section has effect as if, for the overseas part of that year, the individual were non-UK resident.

78

In section 849 (calculation of firm's profits or losses), after subsection (3) insert—

(3A) For any tax year that is a split year as respects the partner, this section has effect as if the partner were non-UK resident in the overseas part of the year.

79

• (1) Section 852 (carrying on by partner of notional trade) is amended as follows.

• (2) For subsection (6) substitute—

(6) If there is a change of residence, the partner is treated as permanently ceasing to carry on one notional trade when that change of residence occurs and starting to carry on another immediately afterwards.

• (3) After subsection (7) insert—

(8) Subsections (1A) and (1B) of section 17 apply for the purposes of subsection (6).

80

• (1) Section 854 (carrying on by partner of notional business) is amended as follows.

• (2) For subsection (5) substitute—

(5) If there is a change of residence, the partner is treated as permanently ceasing to carry on one notional business when that change of residence occurs and starting to carry on another immediately afterwards.

• (3) After that subsection insert—

(5A) Subsections (1A) and (1B) of section 17 apply for the purposes of subsection (5).

Special charging rules for property income

81

In section 270 of ITTOIA 2005 (profits of property businesses: income charged), after subsection (2) insert—

(3) If, as respects an individual carrying on an overseas property business, the tax year is a split year— (a) tax is charged under this Chapter on so much of the profits referred to in subsection (1) as arise in the UK part of the tax year, and (b) the portion of the profits arising in the overseas part of the tax year is, accordingly, not chargeable to tax under this Chapter. (4) In determining how much of the profits arise in the UK part of the tax year— (a) determine first how much of the non-CAA profits arise in the UK part by apportioning the non-CAA profits between the UK part and the overseas part on a just and reasonable basis, and (b) then adjust the portion of the non-CAA profits arising in the UK part by deducting any CAA allowances for the year and adding any CAA charges for the year. (5) In subsection (4)— - “CAA allowances” means allowances treated under section 250 or 250A of CAA 2001 (capital allowances for overseas property businesses) as an expense of the business; - “CAA charges” means charges treated under either of those sections as a receipt of the business; - “non-CAA profits” means profits before account is taken of any CAA allowances or CAA charges.

Special charging rules for savings and investment income

82

Part 4 of ITTOIA 2005 (savings and investment income) is amended as follows.

83

In section 368 (territorial scope of charges in respect of savings and investment income), after subsection (2) insert—

(2A) If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.

84

In section 465 (person liable for tax on gains from life insurance etc: individuals), after subsection (1) insert—

(1A) But if the tax year is a split year as respects the individual, the individual is not liable for tax under this Chapter in respect of gains arising in the overseas part of that year (subject to section 465B).

85

In section 467 (person liable: UK resident trustees), in subsection (4), after paragraph (a) insert—

(aa) is UK resident but the gain arises in the overseas part of a tax year that is, as respects the person who created the trusts, a split year,

.

86

• (1) Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK resident policy holders) is amended as follows.

• (2) The amendments made by sub-paragraphs (3) to (6) apply to section 528 as substituted by paragraph 3 of Schedule 8 to this Act, and have effect in relation to policies and contracts in relation to which that section as so substituted has effect.

• (3) In subsection (1)(b), for the words from “on which” to the end substitute “ that are foreign days ”.

• (4) After subsection (1) insert—

(1A) Foreign days” are— (a) days falling within any tax year for which the individual is not UK resident, and (b) days falling within the overseas part of any tax year that is a split year as respects the individual.

• (5) In subsection (3), in the definition of “A”, for “days falling within subsection (1)(b)” substitute “ foreign days ”.

• (6) In subsection (8), for “subsection (1)(b)” substitute “ subsection (1A)(a) and (b) ”.

• (7) The amendments made by sub-paragraphs (8) to (10) apply to section 528 as in force immediately before the substitution mentioned in sub-paragraph (2) so far as that section as so in force continues to have effect after the substitution.

• (8) In subsection (1), for the words from “the policy holder” to the end substitute “ there are one or more days in the policy period that are foreign days. ”

• (9) After that subsection insert—

(1A) Foreign days” are— (a) days on which the policy holder is not UK resident, and (b) days falling within the overseas part of any tax year that is a split year as respects the policy holder (if the policy holder is an individual).

• (10) In subsection (3), in the definition of “A”, for the words from “on which” to the end substitute “ in the policy period that are foreign days, and ”.

87

• (1) Section 528A (reduction in amount charged on basis of non-UK residence of deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is amended as follows.

• (2) In subsection (1)(b), for the words from “on which” to the end substitute “ that were foreign days ”.

• (3) In subsection (2)—

• (a) in paragraph (b), for the words from “on which” to the end substitute “ that were foreign days, and ”, and

• (b) for paragraph (c), substitute—

(c) the deceased died— (i) in a tax year for which the deceased was UK resident but not one that was a split year as respects the deceased, or (ii) in the UK part of a tax year that was a split year as respects the deceased.

• (4) After that subsection insert—

(2A) Foreign days” are— (a) days falling within any tax year for which the deceased was not UK resident, and (b) days falling within the overseas part of any tax year that was a split year as respects the deceased.

• (5) In subsection (4), in the definition of “A”, for the words from “are days falling” to the end substitute “ were foreign days, and ”.

• (6) In subsection (8), for “subsection (1)(b) or (2)(b)” substitute “ subsection (2A)(a) and (b) ”.

88

• (1) Section 536 (top slicing relieved liability: one chargeable event) is amended as follows.

• (2) The amendment made by sub-paragraph (3) applies to section 536 as amended by paragraph 5 of Schedule 8 to this Act, and has effect in accordance with paragraph 7 of that Schedule.

• (3) For subsection (7) substitute—

(7) If in the case of the individual the gain is reduced under section 528— (a) divide the number of foreign days in the material interest period (as determined in accordance with that section, including subsections (7) and (8)) by 365, (b) if the result is not a whole number, round it down to the nearest whole number, and (c) reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).

• (4) The amendment made by sub-paragraph (5) applies to section 536 as in force immediately before it is amended by paragraph 5 of Schedule 8 to this Act, so far as that section as so in force continues to have effect after it is so amended.

• (5) For subsection (7) substitute—

(7) If the gain is from such a policy— (a) divide the number of foreign days in the policy period (as defined in section 528) by 365, (b) if the result is not a whole number, round it down to the nearest whole number, and (c) reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).

Special charging rules for miscellaneous income

89

In section 577 (territorial scope of charges in respect of miscellaneous income), after subsection (2) insert—

(2A) If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.

Special charging rules for relevant foreign income charged on remittance basis

90

In section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis), for subsection (2) substitute—

(2) For any tax year for which the individual is UK resident, income tax is charged on the full amount of so much (if any) of the relevant foreign income as is remitted to the United Kingdom— (a) in that year, or (b) in the UK part of that year, if that year is a split year as respects the individual.

91

• (1) Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as follows in consequence of the amendment made by the preceding paragraph.

• (2) In section 726 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—

(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).

• (3) In section 730 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—

(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).

• (4) In section 735 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—

(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).

Special charging rules for capital gains

92

TCGA 1992 is amended as follows.

93

• (1) Section 2 (persons and gains chargeable to capital gains tax, and allowable losses) is amended as follows.

• (2) After subsection (1A) (inserted by Schedule 46 to this Act) insert—

(1B) If the year is a split year as respects an individual, the individual is not chargeable to capital gains tax in respect of any chargeable gains accruing to the individual in the overseas part of that year. (1C) But subsection (1B)— (a) does not apply to chargeable gains in respect of which the individual would have been chargeable to capital gains tax under section 10, had the individual been not resident in the UK for the year, and (b) is without prejudice to section 10A.

• (3) In subsection (2)—

• (a) after “the year of assessment” insert “ or, where subsection (1B) applies, the UK part of that year ”, and

• (b) in paragraph (a), after “that year of assessment” insert “ or that part (as the case may be) ”.

94

• (1) Section 3A (reporting limits) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), after “year of assessment” insert “ or, if that year is a split year as respects the individual, the UK part of that year ”, and

• (b) in paragraph (b), after “in that year” insert “ or, as the case may be, that part of the year ”.

• (3) In subsection (2), after “year of assessment” insert “ (or the UK part of such a year) ”.

95

• (1) Section 12 (non-UK domiciled individuals to whom remittance basis applies) is amended as follows.

• (2) After subsection (2) insert—

(2A) If that tax year is a split year as respects the individual, the chargeable gains are treated as accruing to the individual in the part of the year (the overseas part or the UK part) in which the foreign chargeable gains are so remitted.

• (3) In subsection (3), after “that year” insert “ or, where applicable, that part of the year ”.

96

In section 13 (attribution of gains to members of non-resident companies), after subsection (3) insert—

(3A) Subsection (2) does not apply in the case of a participator who is an individual if— (a) the tax year in which the chargeable gain accrues to the company is a split year as respects the participator, and (b) the chargeable gain accrues to the company in the overseas part of that year.

97

In section 16 (computation of losses), after subsection (3) insert—

(3A) If the person is an individual and the year is a split year as respects that individual, subsection (3) also applies to a loss accruing to the individual in the overseas part of that year.

98

In section 16ZB (individual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrue), in subsection (1)(c), after “tax year” insert “ or a part of the applicable tax year ”.

99

• (1) Section 16ZC (individual who has made election under section 16ZA and to whom remittance basis applies) is amended as follows.

• (2) In subsection (3)—

• (a) in paragraph (a), after “that year” insert “ or, if that year is a split year as respects the individual, in the UK part of that year ”, and

• (b) in paragraph (b), after “that year” insert “ or they are so remitted in that year but it is a split year as respects the individual and they are so remitted in the overseas part of the year ”.

• (3) In subsection (7), in the definition of “relevant allowable losses”, after “tax year” insert “ or a part of the tax year ”.

100

In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), in subsection (4)(a), after “the year” insert “ or if, as respects the settlor, the year is a split year, in the UK part of that year ”.

101

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

Trustees of a settlement

102

In section 69 of TCGA 1992 (trustees of settlements), after subsection (2D) insert—

(2DA) A trustee who is resident in the United Kingdom for a tax year is to be treated for the purposes of subsections (2A) and (2B) as if he or she were not resident in the United Kingdom for that year if— (a) the trustee is an individual, (b) the individual becomes or ceases to be a trustee of the settlement during the tax year, (c) that year is a split year as respects the individual, and (d) in that year, the only period when the individual is a trustee of the settlement falls wholly within the overseas part of the year. (2DB) Subsection (2DA) is subject to subsection (2D) and, accordingly, an individual who is treated under subsection (2DA) as not resident is, in spite of that, to be regarded as resident whenever the individual acts as mentioned in subsection (2D).

103

In section 475 of ITA 2007 (residence of trustees), after subsection (6) insert—

(7) Subsection (8) applies if— (a) an individual becomes or ceases to be a trustee of the settlement during a tax year, (b) that year is a split year as respects the individual, and (c) the only period in that year when the individual is a trustee of the settlement falls wholly within the overseas part of the year. (8) The individual is to be treated for the purposes of subsections (4) and (5) as if he or she had been non-UK resident for the year (and hence for the period in that year when he or she was a trustee of the settlement). (9) But subsection (8) is subject to subsection (6) and, accordingly, an individual who is treated under subsection (8) as having been non-UK resident is, in spite of that, to be treated as UK resident whenever the individual acts as mentioned in subsection (6).

Definitions in enactments relating to income tax and CGT

104

• (1) Section 288 of TCGA 1992 (interpretation) is amended as follows.

• (2) In subsection (1), insert the following definition in the appropriate place—

• “split year”, as respects an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment);

.

• (3) After subsection (1ZA) insert—

(1ZB) A reference in this Act to “the overseas part” or “the UK part” of a split year is to be read in accordance with Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment).

105

In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), insert the following entries in the appropriate places—

the overseas part	section 989 of ITA 2007

,

split year	section 989 of ITA 2007

, and

the UK part	section 989 of ITA 2007

.

106

In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), insert the following entries in the appropriate places—

the overseas part	section 989 of ITA 2007

,

split year	section 989 of ITA 2007

, and

the UK part	section 989 of ITA 2007

.

107

In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts), insert the following definitions in the appropriate places—

• “the overseas part”, in relation to a split year, has the meaning given in Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);

,

“split year”, in relation to an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);

, and

“the UK part”, in relation to a split year, has the meaning given in Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);

.

108

In Schedule 4 to that Act (index of defined expressions), insert the following entries in the appropriate places—

the overseas part	section 989

,

split year	section 989

, and

the UK part	section 989

.

PART 4 — Anti-avoidance

Introduction

109

This Part of this Schedule—

• (a) explains when an individual is to be regarded for the purposes of certain enactments as temporarily non-resident,

• (b) defines the year of departure and the period of return for the purposes of those enactments,

• (c) makes consequential amendments to certain enactments containing special rules for temporary non-residents, and

• (d) inserts some more special rules for temporary non-residents in certain cases.

Meaning of temporarily non-resident

110

• (1) An individual is to be regarded as “temporarily non-resident” if—

• (a) the individual has sole UK residence for a residence period,

• (b) immediately following that period (referred to as “period A”), one or more residence periods occur for which the individual does not have sole UK residence,

• (c) at least 4 out of the 7 tax years immediately preceding the year of departure were either—

• (i) a tax year for which the individual had sole UK residence, or

• (ii) a split year that included a residence period for which the individual had sole UK residence, and

• (d) the temporary period of non-residence is 5 years or less.

• (2) Terms used in sub-paragraph (1) are defined below.

Residence periods

111

In relation to an individual, a “residence period” is—

• (a) a tax year that, as respects the individual, is not a split year, or

• (b) the overseas part or the UK part of a tax year that, as respects the individual, is a split year.

Sole UK residence

112

• (1) An individual has “sole UK residence” for a residence period consisting of an entire tax year if—

• (a) the individual is resident in the UK for that year, and

• (b) there is no time in that year when the individual is Treaty non-resident.

• (2) An individual has “sole UK residence” for a residence period consisting of part of a split year if—

• (a) the residence period is the UK part of that year, and

• (b) there is no time in that part of the year when the individual is Treaty non-resident.

• (3) An individual is “Treaty non-resident” at any time if at the time the individual falls to be regarded as resident in a country outside the UK for the purposes of double taxation arrangements having effect at the time.

Temporary period of non-residence

113

In relation to an individual, “the temporary period of non-residence” is the period between—

• (a) the end of period A, and

• (b) the start of the next residence period after period A for which the individual has sole UK residence.

Year of departure

114

“The year of departure” is the tax year consisting of or including period A.

Period of return

115

“The period of return” is the first residence period after period A for which the individual has sole UK residence.

Consequential amendments: income tax

116

In ITEPA 2003, for section 576A substitute—

(576A) (1) This section applies if a person is temporarily non-resident. (2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 575 as if they arose in the period of return. (3) A relevant withdrawal is within this subsection if— (a) it is paid to the person in the temporary period of non-residence, and (b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it). (4) A “relevant withdrawal” is an amount paid under a relevant non-UK scheme that— (a) is paid to the person in respect of a flexible drawdown arrangement relating to the person under the scheme, and (b) would, if the scheme were a registered pension scheme, be “income withdrawal” or “dependants' income withdrawal” within the meaning of paragraphs 7 and 21 of Schedule 28 to FA 2004. (5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the person for the year of return, any relevant withdrawal within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return. (6) This section does not apply to a relevant withdrawal if— (a) it is paid to or in respect of a relieved member of the scheme and is not referable to the member's UK tax-relieved fund under the scheme, or (b) it is paid to or in respect of a transfer member of the scheme and is not referable to the member's relevant transfer fund under the scheme. (7) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as arising in the period of return (or as preventing a charge to that tax from arising as a result). (8) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when a person is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (9) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act; - “flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies; - “remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007; - “the year of return” means the tax year that consists of or includes the period of return. (10) The following expressions have the meaning given in Schedule 34 to FA 2004— - “relevant non-UK scheme” (see paragraph 1(5)); - “relieved member” (see paragraph 1(7)); - “transfer member” (see paragraph 1(8)); - “member's UK tax-relieved fund” (see paragraph 3(2)); - “member's relevant transfer fund” (see paragraph 4(2)).

117

In ITEPA 2003, for section 579CA substitute—

(579CA) (1) This section applies if a person is temporarily non-resident. (2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 579B as if they accrued in the period of return. (3) A relevant withdrawal is within this subsection if— (a) it is paid to the person in the temporary period of non-residence, and (b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it). (4) A “relevant withdrawal” is any income withdrawal or dependants' income withdrawal paid to the person under a registered pension scheme in respect of a flexible drawdown arrangement relating to the person under the scheme. (5) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result). (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when a person is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (7) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act; - “flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies.

118

In ITTOIA 2005, for section 832A substitute—

(832A) (1) This section applies if an individual is temporarily non-resident. (2) Treat any of the individual's relevant foreign income within subsection (3) that is remitted to the United Kingdom in the temporary period of non-residence as remitted to the United Kingdom in the period of return. (3) Relevant foreign income is within this subsection if— (a) it is relevant foreign income for the UK part of the year of departure or an earlier tax year, and (b) section 832 applies to it. (4) Any apportionment required for the purposes of subsection (3)(a) is to be done on a just and reasonable basis. (5) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any relevant foreign income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result). (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (7) In this section, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.

Consequential amendments: capital gains tax

119

In TCGA 1992, for section 10A substitute—

(10A) (1) This section applies if an individual (“the taxpayer”) is temporarily non-resident. (2) The taxpayer is chargeable to capital gains tax as if gains and losses within subsection (3) were chargeable gains or, as the case may be, losses accruing to the taxpayer in the period of return. (3) The gains and losses within this subsection are— (a) chargeable gains and losses that accrued to the taxpayer in the temporary period of non-residence, (b) chargeable gains that would be treated under section 13 as having accrued to the taxpayer in that period if the residence assumption were made, (c) losses that would be allowable in the taxpayer's case under section 13(8) in that period if that assumption were made, and (d) chargeable gains that would be treated under section 86 as having accrued to the taxpayer in a tax year falling wholly in that period if the taxpayer had been resident in the United Kingdom for that year. (4) The residence assumption is— (a) that the taxpayer had been resident in the United Kingdom for the tax year in which the gain or loss accrued to the company, or (b) if that tax year was a split year as respects the taxpayer, that the gain or loss had accrued to the company in the UK part of it. (5) But— (a) a gain is not within subsection (3) if, ignoring this section, the taxpayer is chargeable to capital gains tax in respect of it (and could not cease to be so chargeable by making a claim under section 6 of TIOPA 2010), and (b) a loss is not within subsection (3) if the test in paragraph (a) would be met if it were a gain. (6) Subsection (2) is subject to sections 10AA and 86A. (7) To determine the losses mentioned in subsection (3)(c)— (a) calculate separately, for each tax year falling wholly or partly in the temporary period of non-residence, the portion of sum A that does not exceed sum B, and (b) add up all those portions. (8) For the purposes of subsection (7)— - “sum A” is the aggregate of the losses that were not available in accordance with section 13(8) for reducing gains accruing to the taxpayer by virtue of section 13 in the relevant tax year, but would have been available if the residence assumption had been made, and - “sum B” is the amount of the gains that did not accrue to the taxpayer by virtue of section 13 in that tax year but would have so accrued if that assumption had been made. (9) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the taxpayer for the year of return, any foreign chargeable gains falling within subsection (3) by virtue of paragraph (a) of that subsection that were remitted to the United Kingdom at any time in the temporary period of non-residence are to be treated as remitted to the United Kingdom in the period of return. (10) Part 4 of Schedule 45 to the Finance Act 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (11) In this section— - “foreign chargeable gains” has the meaning given by section 12(4); - “remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007; - “the year of return” means the tax year that consists of or includes the period of return. (10AA) (1) Section 10A(2) does not apply to a gain or loss accruing on the disposal by the taxpayer of an asset if— (a) the asset was acquired by the taxpayer in the temporary period of non-residence, (b) it was so acquired otherwise than by means of a relevant disposal that by virtue of section 58, 73 or 258(4) is treated as having been a disposal on which neither a gain nor a loss accrued, (c) the asset is not an interest created by or arising under a settlement, and (d) the amount or value of the consideration for the acquisition of the asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 153(1)(b), 162(3)(b) or 247(2)(b) or (3)(b). (2) “Relevant disposal” means a disposal of an asset acquired by the person making the disposal at a time when that person was resident in the United Kingdom and was not Treaty non-resident. (3) Subsection (1) does not apply if— (a) the gain is one that (ignoring section 10A) would fall to be treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or part of another asset, and (b) that other asset meets the requirements of paragraphs (a) to (d) of subsection (1), but the asset in respect of which the gain actually accrued or would actually accrue does not. (4) Nothing in any double taxation relief arrangements is to be read as preventing the taxpayer from being chargeable to capital gains tax in respect of any chargeable gains treated under section 10A as accruing to the taxpayer in the period of return (or as preventing a charge to that tax from arising as a result). (5) Nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made prevents any assessment for the year of departure from being made in the taxpayer's case at any time before the end of the second anniversary of the 31 January next following the year of return (as defined in section 10A).

120

For section 86A of TCGA 1992 substitute—

(86A) (1) Subsection (3) applies if— (a) chargeable gains of an amount equal to the amount referred to in section 86(1)(e) for a tax year (“year A”) are treated under section 10A as accruing to a settlor under section 86 in the period of return, (b) there are amounts on which beneficiaries of the settlement are charged to tax under section 87 or 89(2) for one or more tax years, each of which is earlier than the year of return, and (c) those amounts are in respect of matched capital payments received by the beneficiaries. (2) A “matched” capital payment is a capital payment, all or part of which is matched under section 87A with the section 2(2) amount for year A. (3) The amount of the chargeable gains mentioned in subsection (1)(a) for year A that are treated under section 10A as accruing to the settlor under section 86 in the period of return is to be reduced by the appropriate amount. (4) The appropriate amount is— (a) the sum of the amounts mentioned in subsection (1)(c) to the extent that the matched capital payments are matched under section 87A with the section 2(2) amount for year A, or (b) if the property comprised in the settlement has at any time included property not originating from the settlor, so much (if any) of that sum as, on a just and reasonable apportionment, is properly referable to the settlor. (5) If a reduction falls to be made under subsection (3) for the year of return, the deduction to be made in accordance with section 87(4)(b) for the settlement for that year must not be made until— (a) all the reductions to be made under subsection (3) for that year for each settlor have been made, and (b) those reductions are to be made starting with the year immediately preceding the year of return and working backwards. (6) Subsection (7) applies if, with respect to year A, an amount remains to be treated under section 10A as accruing to any of the settlors in the period of return after having made the reductions under subsection (3) with respect to year A. (7) The aggregate of the amounts remaining to be so treated (for all of the settlors) is to be applied in reducing so much of the section 2(2) amount for year A as has not already been matched with a capital payment under section 87A for any year prior to the year of return (but not so as to reduce the section 2(2) amount below zero). (8) In this section— (a) “the settlement” means the settlement in relation to which the settlor mentioned in subsection (1)(a) is a settlor, (b) a reference to “the settlors” or “each settlor” is to the settlors or each settlor in relation to the settlement, (c) “period of return” and “year of return” have the same meanings as in section 10A, and (d) paragraph 8 of Schedule 5 applies in construing the reference to property originating from the settlor.

121

In section 96 (payment by and to companies), in subsection (9A), for the words from “which in his case” to the end substitute

for which he or she was not so resident if— (a) section 10A applies to him or her, and (b) the year falls within the temporary period of non-residence.

122

• (1) Section 279B (deferred unascertainable consideration: supplementary provisions) is amended as follows.

• (2) In subsection (7), for “year of return” substitute “ period of return ”.

• (3) In subsection (8)(a) and (b), for “year” substitute “ period ”.

123

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

• (2) In paragraph 6(1)(b), for “year of return” substitute “ period of return ”.

• (3) In paragraph 12(1)—

• (a) for paragraph (a) substitute—

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

, and

• (b) in paragraph (b), for “the intervening year” substitute “ year A ”.

• (4) In paragraph 12(2), for “year of return” substitute “ period of return ”.

• (5) In paragraph 12A(1)—

• (a) for “year of return” substitute “ period of return ”, and

• (b) for “an intervening year” substitute “ the temporary period of non-residence ”.

New special rule: lump sum payments under pension schemes etc

124

ITEPA 2003 is amended as follows.

125

In Chapter 2 of Part 6 (employer-financed retirement benefits), after section 394 insert—

(394A) (1) This section applies if an individual is temporarily non-resident. (2) Any benefits within subsection (3) are to be treated for the purposes of section 394(1) as if they were received by the individual in the period of return. (3) A benefit is within this subsection if— (a) this Chapter applies to it, (b) it is in the form of a lump sum, (c) it is received by the individual in the temporary period of non-residence, and (d) ignoring this section— (i) no charge to tax arises by virtue of section 394(1) in respect of it, but (ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded. (4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made. (5) Subsection (2) does not affect the operation of section 394(1A) (and, accordingly, “the relevant tax year” for the purposes of section 394(1A) remains the tax year in which the benefit is actually received). (6) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any benefit treated by virtue of this section as received in the period of return (or as preventing a charge to that tax from arising as a result). (7) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (8) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act.

126

In Chapter 2 of Part 7A (employment income provided through third parties: treatment of relevant step for income tax purposes), after section 554Z4 insert—

(554Z4A) (1) This section applies if A is temporarily non-resident. (2) Any relevant step within subsection (3) is to be treated for the purposes of section 554Z2 as if it were taken in the period of return. (3) A relevant step is within this subsection if— (a) it is the payment of a lump sum to a relevant person (see section 554C(2)), (b) the lump sum is a relevant benefit provided under a relevant scheme, (c) the step is taken in the temporary period of non-residence, and (d) ignoring this section— (i) no charge to tax arises by virtue of section 554Z2 by reason of the step, but (ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded. (4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made. (5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any relevant step treated by virtue of this section as taken in the period of return (or as preventing a charge to that tax from arising as a result). (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (7) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act; - “relevant benefit” has the same meaning as in Chapter 2 of Part 6; - “relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies.

127

In that Chapter, after section 554Z11 insert—

(554Z11A) (1) This section applies if A is temporarily non-resident. (2) Any amount within subsection (3) is to be treated for the purposes of section 554Z9(2) or (as the case may be) 554Z10(2) as if it were remitted to the United Kingdom in the period of return. (3) An amount is within this subsection if— (a) it is all or part of a relevant benefit provided to a relevant person (see section 554C(2)) under a relevant scheme, (b) it is provided in the form of the lump sum, (c) it is remitted to the United Kingdom in the temporary period of non-residence, and (d) ignoring this section— (i) no charge to tax arises by virtue of section 554Z9(2) or 554Z10(2) in respect of it, but (ii) such a charge would arise by virtue of one of those sections if the existence of any double taxation relief arrangements were disregarded. (4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made. (5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result). (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (7) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act; - “relevant benefit” has the same meaning as in Chapter 2 of Part 6; - “relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies; - “remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007.

128

In that Chapter, in section 554Z12 (relevant step taken after A's death etc), after subsection (8) insert—

(9) Section 554Z4A and section 554Z11A apply for the purposes of subsection (4) as for the purposes of section 554Z2 and section 554Z9(2) or 554Z10(2) respectively (reading references in sections 554Z4A and 554Z11A to “A” as references to “the relevant person”). (10) But those sections do not apply for the purposes of subsection (4) if the relevant person's temporary period of non-residence began before A died.

129

In Chapter 3 of Part 9 (United Kingdom pensions: general rules), after section 572 insert—

(572A) (1) This section applies if an individual is temporarily non-resident. (2) Any pension within subsection (3) is to be treated for the purposes of section 571 as if it accrued in the period of return. (3) A pension is within this subsection if— (a) section 569 applies to it, (b) it is in the form of a lump sum, (c) it accrued in the temporary period of non-residence, and (d) ignoring this section— (i) it is not chargeable to tax under this Chapter, but (ii) it would be so chargeable if the existence of any double taxation relief arrangements were disregarded. (4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made. (5) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any pension treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result). (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (7) In this section— - “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010; - “DTR claim” means a claim for relief under section 6 of that Act.

130

• (1) In Chapter 1 of Part 11 (pay as you earn: introduction), section 683 is amended as follows.

• (2) After subsection (3) insert—

(3ZA) PAYE employment income” for a tax year does not include any taxable specific income treated as paid or received in that tax year by section 394A or 554Z4A (temporary non-residents).

• (3) For subsection (3B) substitute—

(3B) PAYE pension income” for a tax year does not include any taxable pension income that is treated as accruing in that tax year by section 572A or 579CA (temporary non-residents).

New special rule: distributions to participators in close companies etc

131

Part 4 of ITTOIA 2005 (savings and investment income) is amended as follows.

132

In Chapter 1 (introduction), after section 368 insert—

(368A) (1) This section concerns provisions of this Part that are expressed to apply if an individual is “temporarily non-resident” (“TNR provisions”). (2) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains for the purposes of TNR provisions— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what the following terms mean— (i) “the temporary period of non-residence”, (ii) “the year of departure”, and (iii) “the period of return”. (3) A reference in TNR provisions to “the year of return” is to the tax year consisting of or including the period of return. (4) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of any TNR provisions (or as preventing a charge to that tax from arising as a result). (5) In this section and in TNR provisions, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.

133

In Chapter 3 (dividends etc from UK resident companies and tax credits etc in respect of certain distributions), after section 401B insert—

(401C) (1) This section applies if— (a) an individual is temporarily non-resident, (b) a relevant distribution is made or treated as made to the individual in the temporary period of non-residence, (c) the tax year in which it is made or treated as made (“the distribution year”) is a tax year for which the individual is UK resident, and (d) the amount of income tax charged on the distribution under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded. (2) Subsections (3) and (4) have effect in cases where the distribution year is not the year of return. (3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the distribution disregarding any double taxation relief arrangements. (4) But the notional UK tax on that distribution is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23. (5) If the distribution year is the year of return, the tax charged under this Chapter in respect of the relevant distribution is to be charged and assessed without regard to the existence of double taxation relief arrangements. (6) For the purposes of this section, a dividend or other distribution is a “relevant distribution” if— (a) it is a dividend or other distribution of a close company, and (b) it is made or treated as made to the individual because the individual was at a relevant time— (i) a material participator in the company, or (ii) an associate of a material participator in the company. (7) But a dividend or other distribution within subsection (6) in the form of a cash dividend is not a “relevant distribution” to the extent that the dividend is paid in respect of post-departure trade profits. (8) “Post-departure trade profits” are— (a) trade profits of the close company arising in an accounting period that begins after the start of the temporary period of non-residence, and (b) so much of any trade profits of the close company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period. (9) The extent to which a dividend is paid in respect of post-departure trade profits is to be determined on a just and reasonable basis. (10) The “notional UK tax” on the relevant distribution is so much of the income tax paid by the individual for the distribution year as is attributable on a just and reasonable basis to the relevant distribution. (11) If section 393 applies, references in this section to a distribution being made to the individual are to a cash dividend being paid over to the individual. (12) In this section— - “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454); - “material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act; - “relevant time” means— 1. any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or 2. any time in one or more of the 3 tax years preceding that year; - “trade profits of the close company” means the profits of any trade carried on by the close company, as calculated in accordance with Part 3 of CTA 2009 (trading income).

134

In Chapter 4 (dividends from non-UK resident companies), after section 408 insert—

(408A) (1) This section applies if an individual is temporarily non-resident. (2) Dividends within subsection (3) are to be treated for the purposes of this Chapter as if they were received by the individual, or as if the individual became entitled to them, in the period of return. (3) A dividend is within this subsection if— (a) the individual receives or becomes entitled to it in the temporary period of non-residence, (b) it is a dividend of a company that would be a close company if the company were UK resident, (c) the individual receives or becomes entitled to it by virtue of being at a relevant time— (i) a material participator in the company, or (ii) an associate of a material participator in the company, and (d) ignoring this section, the individual— (i) is not liable for tax under this Chapter in respect of the dividend, but (ii) would have been so liable if the individual had received the dividend, or become entitled to it, in the period of return. (4) For the purposes of subsection (3)— (a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454), (b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act, (c) “relevant time” means— (i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or (ii) any time in one or more of the 3 tax years preceding that year, and (d) paragraph (d)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made. (5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year of return, any dividend within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return. (6) This section does not apply to a dividend within subsection (3) to the extent that it is paid in respect of post-departure trade profits. (7) “Post-departure trade profits” are— (a) trade profits of the company arising in an accounting period that begins after the start of the temporary period of non-residence, and (b) so much of any trade profits of the company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period. (8) The extent to which a dividend is paid in respect of post-departure trade profits is to be determined on a just and reasonable basis. (9) If section 406 or 407 applies, references in this section to a dividend being received by the individual are to a cash dividend being paid over to the individual or (as the case may be) a dividend being treated as paid to the individual. (10) In this section— - “remitted to the United Kingdom” has the meaning given in Chapter A1 of Part 14 of ITA 2007; - “trade profits of the company” means the profits of any trade carried on by the company, as they would be calculated in accordance with Part 3 of CTA 2009 (trading income) if the company were UK resident.

135

In Chapter 5 (stock dividends from UK resident companies), after section 413 insert—

(413A) (1) This section applies if— (a) an individual is temporarily non-resident, (b) relevant stock dividend income is treated under this Chapter as arising to the individual in the temporary period of non-residence, (c) the tax year in which it is treated as arising (“the arising year”) is a tax year for which the individual is UK resident, and (d) the amount of income tax charged on the relevant stock dividend income under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded. (2) Subsections (3) and (4) have effect in cases where the arising year is not the year of return. (3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the relevant stock dividend income disregarding any double taxation relief arrangements. (4) But the notional UK tax on that relevant stock dividend income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23. (5) If the arising year is the year of return, the tax charged under this Chapter in respect of the relevant stock dividend income is to be charged and assessed without regard to the existence of double taxation relief arrangements. (6) Stock dividend income is “relevant stock dividend income” if— (a) the UK resident company that issues the share capital or bonus share capital is a close company, and (b) the individual is beneficially entitled to that share capital or bonus share capital by virtue of being at a relevant time— (i) a material participator in the company, or (ii) an associate of a material participator in the company. (7) But stock dividend income within subsection (6) is not “relevant stock dividend income” to the extent that the share capital or bonus share capital is issued in respect of post-departure trade profits. (8) “Post-departure trade profits” are— (a) trade profits of the close company arising in an accounting period that begins after the start of the temporary period of non-residence, and (b) so much of any trade profits of the close company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period. (9) The extent to which share capital or bonus share capital is issued in respect of post-departure trade profits is to be determined on a just and reasonable basis. (10) The “notional UK tax” on the relevant stock dividend income is so much of the income tax paid by the individual for the arising year as is attributable on a just and reasonable basis to that income. (11) In this section— - “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454); - “material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act; - “relevant time” means— 1. any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or 2. any time in one or more of the 3 tax years preceding that year; - “trade profits of the close company” means the profits of any trade carried on by the close company, as calculated in accordance with Part 3 of CTA 2009 (trading income).

136

In Chapter 6 (release of loan to participator in close company), after section 420 insert—

(420A) (1) This section applies if an individual is temporarily non-resident. (2) Debts within subsection (3) are to be treated for the purposes of this Chapter as if they had been released or written off in the period of return. (3) A debt is within this subsection if— (a) it is the debt, or a part of the debt, in respect of a loan or advance made by a company to the individual, (b) it is released or written off in the temporary period of non-residence, and (c) ignoring this section, the individual— (i) is not liable for tax under this Chapter in respect of the release or write-off, but (ii) would have been so liable, had the release or write-off taken place in the period of return. (4) Subsection (3)(c)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made.

137

In Chapter 8 of Part 5 of that Act (income not otherwise charged), after section 689 insert—

(689A) (1) This section applies if an individual is temporarily non-resident. (2) Distributions within subsection (3) are to be treated for the purposes of this Chapter as if they had been received by the individual, or as if the individual had become entitled to them, in the period of return. (3) A distribution is within this subsection if— (a) the individual receives or becomes entitled to it in the temporary period of non-residence, (b) it is a distribution of a company that is a close company or that would be a close company if the company were UK resident, (c) the individual receives or becomes entitled to the distribution by virtue of being at a relevant time— (i) a material participator in the company, or (ii) an associate of a material participator in the company, and (d) ignoring this section, the individual— (i) is not liable for tax under this Chapter in respect of the distribution, but (ii) would have been so liable if the individual had received the distribution, or become entitled to it, in the period of return. (4) For the purposes of subsection (3)— (a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454), (b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act, (c) “relevant time” means— (i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or (ii) any time in one or more of the 3 tax years preceding that year, and (d) paragraph (d)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made. (5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year of return, any distribution within subsection (3) that is relevant foreign income and is remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return. (6) In this section, “remitted to the United Kingdom” has the meaning given in Chapter A1 of Part 14 of ITA 2007.

138

In Chapter 1 of Part 14 of ITA 2007 (limits on liability to income tax of non-UK residents), after section 812 insert—

(812A) (1) This section applies if— (a) an individual is temporarily non-resident, (b) the individual's liability to income tax for a tax year is limited under section 811, (c) that tax year (“the non-resident year”) falls within the temporary period of non-residence, and (d) the individual's income for that tax year includes relevant investment income. (2) The total income (see Step 1 of the calculation in section 23) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount of that relevant investment income. (3) But the notional UK tax on that relevant investment income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23. (4) Income is “relevant investment income” if— (a) it is chargeable under Chapter 3 or 5 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies and stock dividends from UK resident companies), (b) the distributing company is a close company, and (c) the income arises or is treated as arising to the individual because the individual was at a relevant time— (i) a material participator in that company, or (ii) an associate of a material participator in the company. (5) But income within subsection (4) in the form of a cash or stock dividend is not “relevant investment income” to the extent that the dividend is paid, or the share capital is issued, in respect of post-departure trade profits. (6) “Post-departure trade profits” are— (a) trade profits of the distributing company arising in an accounting period that begins after the start of the temporary period of non-residence, and (b) so much of any trade profits of the distributing company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period. (7) The “notional UK tax” on relevant investment income is— (a) the total of any sums in respect of that income that were included within amount A in determining the limit under section 811, less (b) any credit for foreign tax paid in respect of that income that was allowed under Chapter 2 of Part 2 of TIOPA 2010 against the individual's liability to income tax for the non-resident year. (8) The following matters are to be determined on a just and reasonable basis— (a) the extent to which a dividend is paid, or share capital is issued, in respect of post-departure trade profits, and (b) the extent to which a sum included within amount A is a sum in respect of relevant investment income. (9) Nothing in any double taxation arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of this section (or as preventing a charge to that tax from arising as a result). (10) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence”, “the year of departure” and “the period of return” mean. (11) In this section— - “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454); - “the distributing company” means the UK resident company mentioned in section 383(1) or, as the case may be, 410(1) of ITTOIA 2005; - “material participator” means a participator who has a material interest in the company, as defined in section 457 of CTA 2010; - “relevant time” means— 1. any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or 2. any time in one or more of the 3 tax years preceding that year; - “trade profits of the distributing company” means the profits of any trade carried on by the distributing company, as calculated in accordance with Part 3 of CTA 2009 (trading income); - “year of return” means the tax year consisting of or including the period of return.

New special rule: chargeable event gains

139

Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc) is amended as follows.

140

After section 465A insert—

(465B) (1) This section applies if an individual is temporarily non-resident. (2) The individual is liable for tax under this Chapter for the year of return in respect of any gain that meets the conditions in subsection (3). (3) The conditions are— (a) the gain arose in the temporary period of non-residence, (b) it arose from a policy issued in respect of an insurance made, or from a contract made, before the start of that period, (c) the chargeable event giving rise to it was neither a death nor a chargeable event treated as occurring under section 525(2), (d) no-one is liable under section 466 or 467 in respect of the gain, (e) no-one is liable by virtue of section 468 for either the year of return or an earlier tax year as a result of the gain, and (f) the individual would have been liable under section 465 in respect of the gain, applying the assumptions in subsection (4). (4) The assumptions are— (a) the individual was UK resident for the tax year in which the gain arose, and (b) that tax year was not a split year as respects the individual. (5) If the individual is liable by virtue of subsection (2) in respect of a gain— (a) the amount of the gain in respect of which he or she is liable is the amount on which tax would have been charged under this Chapter applying the assumptions in subsection (4), but (b) in determining that amount, section 528 must be applied ignoring those assumptions. (6) That amount is treated as income of the individual for the year of return. (7) If the gain arises from a policy or contract treated under section 473A as a single policy or contract, the date, for the purposes of subsection (3)(b), on which the insurance or contract is made is the date on which the first insurance is made in respect of which the connected policies were issued or, as the case may be, the date on which the first of the connected contracts is made. (8) This section does not apply to a gain if— (a) in relation to the policy or contract from which the gain arises, a terminal event occurs in the temporary period of non-residence or in the period of return, (b) the chargeable event giving rise to the gain occurred before that terminal event, (c) the chargeable event giving rise to the gain is one that is treated as occurring under section 509(1) as a result of the application of section 498(1)(a), (d) section 498(1)(a) applies other than by virtue of section 500, and (e) a person (whether or not the individual) is liable for tax under this Chapter (including by virtue of this section) in respect of any gain resulting from the terminal event. (9) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being liable for tax under this Chapter in respect of any gain in respect of which the individual is liable for tax by virtue of subsection (2) (or as preventing a charge to tax on that gain from arising under this Chapter). (10) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains— (a) when an individual is to be regarded as “temporarily non-resident”, and (b) what “the temporary period of non-residence” and “the period of return” mean. (11) In this section— terminal event” means an event mentioned in section 499(3); “year of return” means the tax year that consists of or includes the period of return.

141

In section 468 (non-UK resident trustees and foreign institutions), after subsection (6) insert—

(7) This section does not apply if someone is liable under section 465B in respect of the gain.

142

In section 514 (chargeable events where transaction-related calculations show gains), after subsection (4) insert—

(4A) Subsection (3)(b) includes a case where a person would be liable to tax on the gain under section 465B for the tax year in which the transaction occurs (because the transaction occurs in the year of return, as defined in that section).

143

In section 541 (calculation of deficiencies), in subsection (4)(b), after “that section” insert “ or formed part of the total income of that individual by virtue of section 465B for the tax year mentioned in section 539(1) ”.

144

In section 552 of ICTA (information: duties of insurers), in subsection (13), for “section 541A” substitute “ section 465B or 541A ”.

PART 5 — Miscellaneous

Interpretation

145

In this Schedule—

• “corporation tax” includes any amount assessable or chargeable as if it were corporation tax;

• “country” includes a state or territory;

• “cross-border trip” is defined in paragraph 30;

• “double taxation arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;

• “employment”—has the meaning given in section 4 of ITEPA 2003, andincludes an office within the meaning of section 5(3) of that Act;

• “enactment” means an enactment whenever passed (including this Act) and includes—an Act of the Scottish Parliament,a Measure or Act of the National Assembly for Wales,any Northern Ireland legislation as defined by section 24(5) of the Interpretation Act 1978, andany Orders in Council, orders, rules, regulations, schemes warrants, byelaws and other instruments made under an enactment (including anything mentioned in paragraphs (a) to (c) of this definition);

• “home” is to be construed in accordance with paragraph 25;

• “individual” means an individual acting in any capacity (including as trustee or personal representative);

• “overseas” means anywhere outside the UK;

• “parenting leave” means maternity leave, paternity leave, adoption leave, parental leave , parental bereavement leave or neonatal care leave (whether statutory or otherwise);

• “relevant job on board a vehicle, aircraft or ship” is defined in paragraph 30;

• “ship” includes any kind of vessel (including a hovercraft);

• “significant break from overseas work” is defined in paragraph 29;

• “significant break from UK work” is defined in paragraph 29;

• “split year”, as respects an individual, means a tax year that is, as respects that individual, a split year within the meaning of Part 3 of this Schedule;

• “trade” also includes—a profession or vocation,anything that is treated as a trade for income tax purposes, andthe commercial occupation of woodlands (within the meaning of section 11(2) of ITTOIA 2005);

• “work” is defined in paragraph 26;

• “UK” means the United Kingdom, including the territorial sea of the United Kingdom;

• “UK tie” is defined in paragraph 31;

• “whole month” means the whole of January, the whole of February and so on, except that the period from the start of a tax year to the end of April is to count as a whole month.

146

In relation to an individual who carries on a trade—

• (a) a reference in this Schedule to annual leave or parenting leave is to reasonable amounts of time off from work for the same purposes as the purposes for which annual leave or parenting leave is taken, and

• (b) what are “reasonable amounts” is to be assessed having regard to the annual leave or parenting leave to which an employee might reasonably expect to be entitled if doing similar work.

147

A reference in this Schedule to a number of days being less than a specified number includes a case where the number of days is zero.

Consequential amendments

148

• (1) TCGA 1992 is amended as follows.

• (2) Omit section 9.

• (3) In section 288 (interpretation)—

• (a) in subsection (1), insert the following definition at the appropriate place—

• “resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013;

, and

• (b) in the Table in subsection (8), omit the entry for the expressions “resident” and “ordinarily resident”.

149

In section 27 of ITEPA 2003 (UK-based earnings for year when employee not UK resident), in subsection (1), for “in which” substitute “ for which ”.

150

In section 465 of ITTOIA 2005 (gains from contracts for life insurance etc: liability of individuals), in subsection (1), for “in the tax year” substitute “ for the tax year ”.

151

• (1) Chapter 4 of Part 2 of FA 2005 (trusts with vulnerable beneficiary) is amended as follows.

• (2) In section 28 (vulnerable person's liability: VQTI), for subsection (4) substitute—

(4) Where the vulnerable person is non-UK resident for the tax year, his or her income tax liability for the purposes of determining TLV1 and TLV2 is to be computed in accordance with the Income Tax Acts on the assumption that— (a) he or she is UK resident for the tax year, (b) that year is not, as respects him or her, a split year within the meaning of Part 3 of Schedule 45 to FA 2013, and (c) he or she is domiciled in the United Kingdom throughout that year.

• (3) In section 30 (qualifying trusts gains: special capital gains tax treatment)—

• (a) in subsection (2)(a) and (b), for “during” substitute “ for ”, and

• (b) omit subsection (5).

• (4) In section 31 (UK resident vulnerable persons: amount of relief), in subsection (1), for “during” substitute “ for ”.

• (5) In section 32 (non-UK resident vulnerable persons: amount of relief), in subsection (1), for “during” substitute “ for ”.

• (6) In section 41—

• (a) in subsection (1), insert the following definitions in the appropriate places—

• “non-UK resident” means not resident in the United Kingdom in accordance with the statutory residence test in Part 1 of Schedule 45 to FA 2013,

, and

“UK resident” means resident in the United Kingdom in accordance with the statutory residence test in Part 1 of Schedule 45 to FA 2013.

, and

• (b) omit subsection (2).

152

• (1) ITA 2007 is amended as follows.

• (2) In section 809B (claim for remittance basis to apply), in subsection (1)(a), for “in that year” substitute “ for that year ”.

• (3) In section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000), in subsection (1)(a), for “in that year” substitute “ for that year ”.

• (4) In section 809E (application of remittance basis without claim: other cases), in subsection (1)(a), for “in that year” substitute “ for that year ”.

• (5) In section 810 (limits on liability to income tax of non-UK residents: overview of Chapter), after subsection (3) insert—

(4) In relation to an individual— (a) a reference in this Chapter to a non-UK resident's liability to income tax is a reference to the liability of someone who is non-UK resident for the tax year for which the liability arises, and (b) accordingly, enactments under which income arising to a UK resident in the overseas part of a split year is treated as arising to a non-UK resident are of no relevance to this Chapter.

• (6) Omit sections 829 to 832.

Commencement

153

• (1) Parts 1 and 2 of this Schedule have effect for determining whether individuals are resident or not resident in the UK for the tax year 2013-14 or any subsequent tax year.

• (2) Part 3 of this Schedule has effect in calculating an individual's liability to income tax or capital gains tax for the tax year 2013-14 or any subsequent tax year.

• (3) Part 4 of this Schedule has effect if the year of departure (as defined in that Part) is the tax year 2013-14 or a subsequent tax year.

Transitional and saving provision

154

• (1) This paragraph applies if—

• (a) year X or, in Part 3 of this Schedule, the relevant year is the tax year 2013-14, 2014-15, 2015-16, 2016-17 or 2017-18, and

• (b) it is necessary to determine under this Schedule whether an individual was resident or not resident in the UK for a tax year before the tax year 2013-14 (a “pre-commencement tax year”).

• (2) The question under this Schedule is to be determined in accordance with the rules in force for determining an individual's residence for that pre-commencement tax year (and not in accordance with the statutory residence test).

• (3) But an individual may by notice in writing to Her Majesty's Revenue and Customs elect, as respects one or more pre-commencement tax years, for the question under this Schedule to be determined instead in accordance with the statutory residence test.

• (4) A notice under sub-paragraph (3)—

• (a) must be given no later than the first anniversary of the end of year X or, in a Part 3 case, the relevant year, and

• (b) is irrevocable.

• (5) Unless, in relation to a pre-commencement tax year, an election is made under sub-paragraph (3) as respects that year—

• (a) paragraph 10(b) of this Schedule has effect in relation to that year as if the words “by virtue of meeting the automatic residence test” were omitted,

• (b) paragraph 16 of this Schedule has effect in relation to that year as if—

• (i) in sub-paragraph (1)(b), the words “because P met the third automatic overseas test for each of those years” were omitted, and

• (ii) in sub-paragraph (2)(a), the words “because P met the third automatic overseas test for that year” were omitted, and

• (c) paragraph 49 of this Schedule has effect in relation to that year as if in sub-paragraph (2)(a) for the words from “because” to the end there were substituted “ in circumstances where the taxpayer was working overseas full-time for the whole of that year. ”

155

• (1) This paragraph applies if—

• (a) year X or, for Part 3 of this Schedule, the tax year for which an individual's liability to tax is being calculated is the tax year 2013-14 or a subsequent tax year, and