Finance Act 2013

(384B) (1) Relief is not to be given under this Chapter for a tax year for interest paid by a person on a relevant loan if the partnership to which the loan relates has made an election under section 25A of ITTOIA 2005 (cash basis for small businesses) for the tax year. (2) A loan is a “relevant loan” if— (a) it is a loan to which section 388 applies (loan to buy plant or machinery for partnership use), or (b) it is a loan to which section 398 applies (loan to invest in partnership) and which is not used for purchasing a share in a partnership.

PART 3 — Commencement and transitional provision

56

Subject to paragraph 57, the amendments made by this Schedule have effect for the tax year 2013-14 and subsequent tax years.

57

• (1) In a case where—

• (a) the profits of a barrister or advocate in independent practice for a period of account ending in the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005 (barristers and advocates: alternative basis of calculation in early years of practice), and

• (b) if that section had not been repealed by this Schedule, the profits of the barrister or advocate for any subsequent period of account could have been calculated in accordance with that section,

the profits of the barrister or advocate for that subsequent period of account may be calculated in accordance with that section.

• (2) The repeal of sections 238 and 239 of ITTOIA 2005 (spreading of adjustment income: barristers and advocates) does not have effect in relation to any individual whose profits for a period of account ending in or before the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005.

SCHEDULE 5

1

Part 2 of ITTOIA 2005 (trading income) is amended as follows.

2

After Chapter 5 insert—

(94B) The provisions of this Chapter apply to professions and vocations as they apply to trades. (94C) The provisions of this Chapter do not apply in calculating the profits of a trade carried on by a firm for a period if one or more of the persons who have been partners in the firm at any time during the period was not an individual at that time. (94D) (1) This section applies if, in calculating the profits of a trade of a person for a period— (a) a deduction would otherwise be allowable for the period in respect of qualifying expenditure incurred in relation to a relevant vehicle (see subsection (2)), or (b) a deduction would be so allowable in respect of such expenditure but for the fact it is capital expenditure. (2) In this section “relevant vehicle” means a car, motor cycle or goods vehicle that— (a) is used for the purposes of the trade, and (b) is not an excluded vehicle (see section 94E). (3) The person may make a deduction under this section for the period in respect of the qualifying expenditure. (4) If a deduction for a period is made under this section— (a) no other deduction is allowed (for that or any other period) in respect of the qualifying expenditure, and (b) this section applies in relation to the relevant vehicle for every subsequent period for which the vehicle is used for the purposes of the trade. (5) The amount of the deduction is the appropriate mileage amount in relation to the relevant vehicle for the period (see section 94F). (6) In this section “qualifying expenditure”, in relation to a vehicle, means any expenditure incurred in respect of the acquisition, ownership, hire, leasing or use of the vehicle, other than incidental expenses incurred in connection with a particular journey. (7) For provision preventing capital allowances from being claimed in respect of qualifying expenditure incurred in relation to a relevant vehicle, see section 38ZA of CAA 2001. (94E) (1) A car, motor cycle or goods vehicle that is used for the purposes of a trade is an “excluded vehicle” for the purposes of section 94D if condition A or B is met in relation to the vehicle. (2) Condition A is that the person who is or has been carrying on the trade has at any time claimed any capital allowances under Part 2 of CAA 2001 in respect of any expenditure incurred on the provision of the vehicle. (3) Condition B is that— (a) the vehicle is a goods vehicle or a motor cycle, and (b) any of the expenditure incurred on acquiring the vehicle has been deducted in calculating the profits of the trade for a period on the cash basis (see section 25A). (94F) (1) In calculating the profits of a trade for a period, the appropriate mileage amount in relation to a relevant vehicle for the period is— $$M × R$where—M is the number of miles of business journeys made by a person (other than as a passenger) using that vehicle in the period, andR is the rate applicable to that kind of vehicle.$ (2) The rates applicable are as follows—

Kind of vehicle	Rate per mile
Car or goods vehicle	45p for the first 10,000 miles
Car or goods vehicle	25p after that
Motor cycle	24p

(3) In a case where the total number of miles of relevant business journeys made in the period is greater than 10,000, the rate of 45p per mile is available only in relation to 10,000 of those miles. (4) “Relevant business journey” means any business journey made in the period by a car or goods vehicle— (a) that is used for the purposes of the trade, and (b) in relation to which section 94D applies for the period. (5) In this section— - “business journey”, in relation to a vehicle used for the purposes of a trade, means any journey, or any identifiable part or proportion of a journey, that is made wholly and exclusively for the purposes of the trade, and - “relevant vehicle” has the same meaning as in section 94D. (6) The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands. Regulations under this subsection may also make consequential amendments to subsection (3). (94G) (1) This section applies for the purposes of sections 94D to 94F (and this section). (2) “Car” means a mechanically propelled road vehicle which is not— (a) a goods vehicle, (b) a motor cycle, (c) an invalid carriage, or (d) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used. (3) “Goods vehicle” means a mechanically propelled road vehicle which— (a) is of a construction primarily suited for the conveyance of goods or burden of any description, and (b) is not a motor cycle. (4) “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988. (5) For the purposes of this section “invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988. (94H) (1) This section applies if, in calculating the profits of a trade of a person for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of the use of the person's home for the purposes of the trade. (2) The person may, instead of making the standard deduction, make a deduction for the period under this section. (3) The amount of the deduction allowable for the period is the sum of the applicable amounts for each month, or part of a month, falling within the period. (4) The applicable amount for a month, or part of a month, is given by the following Table—

Number of hours worked	Applicable amount
25 or more	£10.00
51 or more	£18.00
101 or more	£26.00

where the “number of hours worked” in a month (or part of a month) is the number of hours spent wholly and exclusively on work done by the person, or any employee of the person, in the person's home wholly and exclusively for the purposes of the trade.

(5) If the person has more than one home, this section has effect as if those homes were a single home. (6) The Treasury may by regulations amend subsection (4) so as to alter the rates or rate bands. (94I) (1) This section applies if— (a) a person carries on a trade at any premises, (b) the premises are used mainly for the purposes of carrying on the trade, but are also used by the person as a home, (c) the person incurs expenses in relation to the premises, (d) the expenses are incurred mainly (but not wholly and exclusively) for the purposes of the trade, and (e) in calculating the profits of the trade for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of a part or proportion of the expenses in accordance with section 34(2). (2) The person may, instead of making the standard deduction, make a deduction for the period under this section. (3) The amount of the deduction allowable for the period is the amount of the expenses less the non-business use amount. (4) The non-business use amount is the sum of the applicable amounts for each month, or part of a month, falling within the period. (5) The applicable amount for a month, or part of a month, is given by the following Table—

Number of relevant occupants	Applicable amount
1	£350
2	£500
3 or more	£650

(6) For the purposes of subsection (5) “relevant occupant”, in relation to a month (or part of a month), means an individual who, at any time during that month (or that part of a month)— (a) occupies the premises as a home, or (b) stays at the premises otherwise than in the course of the trade. (7) The Treasury may by regulations amend subsection (5) so as to alter the rates or rate bands.

3

In section 31 (relationship between rules prohibiting and allowing deductions), in subsection (2), after paragraph (a) insert—

(aa) Chapter 5A,

.

4

In Chapter 18 (post-cessation receipts), in section 254 (allowable deductions), after subsection (2A) (inserted by paragraph 39 of Schedule 4) insert—

(2B) If— (a) the loss or expense is incurred, or the debit arises, in relation to a vehicle, and (b) immediately before the person permanently ceases to carry on the trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle, assume for the purposes of subsection (2) that that section applies in relation to the vehicle.

5

• (1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

• (2) In Chapter 3 (qualifying expenditure), after section 38 insert—

(38ZA) Expenditure is not qualifying expenditure if— (a) it is incurred in respect of a vehicle in a period, and (b) a deduction is made for the period in respect of the expenditure under section 94D of ITTOIA 2005 (deduction allowable at fixed rate for expenditure on vehicles).

• (3) In Chapter 5 (allowances and charges), in section 59 (unrelieved qualifying expenditure), at the end insert—

(8) Subsection (9) applies if— (a) a person carrying on a trade, profession or vocation incurs expenditure in relation to a vehicle, (b) at the end of the basis period for a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending with that basis period (“the relevant chargeable period”), (c) in calculating the profits of a trade, profession or vocation of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 in respect of expenditure incurred in relation to the vehicle, and (d) the person does not enter the cash basis for that tax year. (9) None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period. (10) Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of the unrelieved qualifying expenditure incurred in relation to the vehicle is to be determined on such basis as is just and reasonable in all the circumstances.

6

The amendments made by this Schedule have effect for the tax year 2013-14 and subsequent tax years.

SCHEDULE 6

PART 1 — Apportionment of earnings

1

Part 2 of ITEPA 2003 (employment income: charge to tax) is amended as follows.

2

In section 15 (earnings for year when employee UK resident), as amended by Schedule 45 to this Act, in subsection (5)—

• (a) after paragraph (a) omit “and”, and

• (b) after paragraph (b) insert

, and (c) section 41ZA (which is about determining the extent to which general earnings are in respect of United Kingdom duties).

3

In Chapter 5 (taxable earnings: remittance basis rules and rules for non-UK resident employees), after section 41 insert—

(41ZA) The extent to which general earnings are in respect of duties performed in the United Kingdom is to be determined under this Chapter on a just and reasonable basis.

PART 2 — Remittance basis of taxation: special mixed fund rules

4

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

5

In section 809Q (sections 809L and 809P: transfers from mixed funds), after subsection (1) insert—

(1A) But this section must be read subject to section 809RA.

6

After section 809R insert—

(809RA) (1) This section applies if— (a) an individual has general earnings from an employment for a tax year, (b) those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”), (c) at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into an account in that tax year at a time (a “relevant time”) when the account is a qualifying account of the individual, and (d) at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in that tax year at a relevant time. (2) If this section applies, the composition of each transfer made from the account in that tax year at a relevant time is to be determined as follows— - Step 1 Suppose that all the condition A transfers made from the account in the tax year at a relevant time had been a single transfer made from the account at the end of the tax year. - Step 2 Suppose that all the other transfers made from the account in the tax year at a relevant time had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in step 1. - Step 3 Applying those suppositions— 1. find under section 809Q(3) the extent to which the single transfer mentioned in step 1 is of the individual's income or chargeable gains, and 2. find under section 809R(4) the content of the single offshore transfer mentioned in step 2. - Step 4 Each transfer made from the account in the tax year at a relevant time is to be treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.“The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.“The relevant deemed transfer” is— 1. if the transfer is a condition A transfer, the single transfer mentioned in step 1, and 2. otherwise, the single offshore transfer mentioned in step 2. (3) Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter. (4) If the tax year is the tax year in which the account becomes a qualifying account, for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling before the qualifying date for the account as a separate tax year. (5) If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule— (a) subsection (2) has effect as if references to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account, and (b) for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling after the day mentioned in paragraph (a) as a separate tax year. (6) A transfer from the account is a “condition A transfer” if and to the extent that— (a) condition A in section 809L is met, and (b) either— (i) the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or (ii) the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c). (7) A transfer from the account is an “other transfer” if and to the extent that it is not a condition A transfer. (8) Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year— (a) it is not a condition A transfer, and (b) on the basis of the best estimate that can reasonably be made at that time, it will not become a condition A transfer. (9) If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule, subsection (8) has effect as if the reference to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account. (10) “Qualifying account” and “the qualifying date” for an account are defined in section 809RB. (11) For the purposes of this section and sections 809RB to 809RD— (a) “employment” is to be read in accordance with section 4(1) of ITEPA 2003, and includes an office (as read in accordance with section 5(3) of that Act), (b) whether general earnings are “for” a tax year is to be determined as for the purposes of the employment income Parts of ITEPA 2003 (see section 3(2) of that Act), (c) a reference to anything “paid into” an account includes anything credited to the account by whatever means, and (d) references to a breach of the deposit rule are to be read in accordance with section 809RC. (809RB) (1) An individual may by notice to the Commissioners nominate an account to be a qualifying account of the individual for the purposes of section 809RA. (2) The notice must specify the qualifying date for the account. (3) “The qualifying date” for the account is the first date on which there is paid into the account sums falling within subsection (4) which (in total) are more than £10. (4) A sum falls within this subsection if it is, or derives wholly (whether directly or indirectly) from, general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment. (5) A tax year is a “relevant” tax year in relation to an employment if the general earnings which the individual has for the tax year from the employment include both general earnings within section 15(1) of ITEPA 2003 and general earnings within section 26(1) of that Act. (6) The individual may withdraw the nomination by giving a further notice to the Commissioners, specifying the date with effect from which the nomination is withdrawn. (7) A notice under subsection (1) or (6) must be in writing and include such information as the Commissioners may reasonably require. (8) A notice under subsection (1) or (6) must be given no later than— (a) 31 January in the tax year following the tax year in which falls, as the case may be— (i) the qualifying date for the account, or (ii) the date with effect from which the nomination is withdrawn, or (b) such later date as the Commissioners may allow. (9) If an individual nominates an account under this section, the account is a “qualifying account” of the individual throughout the period— (a) beginning with the qualifying date, and (b) ending with the date before the earliest of the following dates— (i) the date on which the account is closed or ceases to be an ordinary bank account held by and for the benefit of the individual (alone or jointly with others); (ii) the date with effect from which the nomination is withdrawn under this section; (iii) the qualifying date for another qualifying account of the individual; (iv) 6 April in a tax year in which there is a breach of the deposit rule which is not remedied or cannot be remedied; (v) 6 April in a tax year for which the individual has no general earnings within section 26(1) of ITEPA 2003. (10) The account is not to be a qualifying account at all if— (a) at any time on the qualifying date, the account is not an ordinary bank account held by and for the benefit of the individual (alone or jointly with others), or (b) immediately before the qualifying date, the account has a credit balance of more than £10. (11) The account is not to be a qualifying account at all if the qualifying date falls in a tax year— (a) for which the individual has no general earnings within section 26(1) of ITEPA 2003, or (b) in which there is a breach of the deposit rule which is not remedied or cannot be remedied. (12) Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the breach occurs on or after a date falling within subsection (9)(b)(i) to (iii). (13) If, apart from this subsection, an individual might have nominated two or more accounts for which the qualifying date would be the same, the individual may nominate only one of those accounts. (14) If, apart from this subsection, an account would be a qualifying account of two or more individuals at any time, it is not to be a qualifying account of either or any of them at that time or any other time. (15) For the purposes of this section an account is an “ordinary bank account” if it is a cash account in a bank (whether a current or savings account) where sums standing to the credit of the account from time to time represent a debt owed by the bank to the account-holder. (809RC) (1) There is a breach of the deposit rule if a prohibited sum is paid into the account on or after the qualifying date. (2) A breach of the deposit rule is remedied if, within 30 days beginning with the day on which the individual became or ought reasonably to have become aware of the payment of the prohibited sum, the required amount is transferred out of the account by way of a single one-off transfer. (3) “The required amount” is an amount equal to— (a) the prohibited sum, plus (b) all the other prohibited sums (if any) that have been paid into the account since that sum was paid in. (4) If there are 3 breaches of the deposit rule in any 12 month period, subsection (2) does not apply to the third breach and, accordingly, the third breach cannot be remedied. (5) The payment of a prohibited sum (“the later prohibited sum”) into the account does not result in a breach of the deposit rule if— (a) a breach resulting from an earlier payment of a prohibited sum into the account is remedied, and (b) the later prohibited sum is represented by the required amount in relation to that breach. (6) A “prohibited sum” is anything other than a sum that is, or derives wholly (whether directly or indirectly) from, any of the following kinds of income or capital— (a) general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment, (b) general earnings of the individual from an employment which consist of money and are paid in a tax year which is a relevant tax year in relation to the employment, (c) an amount of specific employment income which, by virtue of Part 6, 7 or 7A of ITEPA 2003 or any other enactment, counts as employment income of the individual in respect of an employment for a tax year which is a relevant tax year in relation to the employment, (d) interest on the account, or (e) consideration for the disposal of employment-related securities or employment-related securities options in the circumstances described in subsection (7). (7) The circumstances are— (a) the securities or options were acquired pursuant to a right or opportunity available by reason of an employment of the individual, (b) the disposal is or occurs in conjunction with, or as soon as reasonably practicable after, a relevant event involving those securities or options, and (c) the tax year in which the relevant event occurs is a relevant tax year in relation to the employment. (8) For the purposes of subsection (7) each of the following is a “relevant event”— (a) the acquisition mentioned in subsection (7)(a), and (b) any event on the occurrence of which an amount (if positive) counts as employment income by virtue of Part 7 of ITEPA 2003 or would do so but for— (i) section 421E or 474 of that Act (exclusions: residence etc), or (ii) an election under section 430 or 431 of that Act. (9) For the purposes of this section a tax year is a “relevant” tax year in relation to an employment if— (a) the individual has general earnings from the employment for the tax year, (b) those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”), (c) at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into the account in the tax year, and (d) at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in the tax year. (10) For the purposes of this section— (a) “employment-related securities” has the meaning given in section 421B(8) of ITEPA 2003, and (b) “employment-related securities options” has the meaning given in section 471(5) of that Act. (809RD) (1) This section applies if the required amount in relation to a breach of the deposit rule was transferred out of the account in accordance with section 809RC(2). (2) Sections 809Q and 809R have effect as if— (a) the intervening transactions had never taken place, and (b) each prohibited sum represented by the required amount had instead been transferred directly (at the time that sum was paid into the qualifying account) into the account or other property into which the required amount was transferred by virtue of the single one-off transfer. (3) Each of the following is an “intervening transaction”— (a) each payment into the qualifying account of a prohibited sum represented by the required amount, and (b) the single one-off transfer out of the qualifying account. (4) If it is supposed under step 1 or 2 of section 809RA(2) that a single transfer had been made in the intervening period, re-apply section 809Q or 809R in relation to that transfer taking account of subsection (2). (5) “The intervening period” is the period— (a) beginning with the day on which the breach occurred, and (b) ending with the day on which the single one-off transfer was made in accordance with section 809RC(2). (6) If more than one transfer of a sum equal to the required amount was transferred out of the qualifying account within the 30-day grace period, the first of those transfers is assumed to be the single one-off transfer. (7) “The 30-day grace period” is the period of 30 days mentioned in section 809RC(2).

PART 3 — Commencement

7

The amendments made by Part 1 of this Schedule have effect in relation to earnings for the tax year 2013-14 and subsequent tax years.

8

The amendments made by Part 2 of this Schedule have effect in relation to transfers from a mixed fund that are made in the tax year 2013-14 or any subsequent tax year.

SCHEDULE 7

1

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2

In section 809X(3) (exempt property: public access rule), for “sections 809Z and 809Z1)” substitute “ section 809Z) ”.

3

• (1) Section 809Y (property that ceases to be exempt property treated as remitted) is amended as follows.

• (2) In subsection (2), for “either” substitute “ any ”.

• (3) After subsection (4) insert—

(4A) Where exempt property has been lost, stolen or destroyed, the first and second cases do not apply in relation to the property during any period— (a) beginning with the time at which it was lost, stolen or destroyed, and (b) (if lost or stolen) ending with the time at which it is recovered. (4B) The third case is where a compensation payment is released in respect of exempt property that has been lost, stolen or destroyed.

• (4) In subsection (6), after “exempt property” insert “ by virtue of the first or second case ”.

4

After section 809YE insert—

(809YF) (1) Section 809Y(1) does not apply to property if— (a) it ceases to be exempt property because a compensation payment in respect of it is released, and (b) conditions A and B are met. (2) Condition A is that the whole of the compensation payment is taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the payment is released. (3) Condition B is that, if Condition A is satisfied wholly or in part by using the compensation payment to make a qualifying investment, the remittance basis user makes a claim for relief under subsection (4) on or before the first anniversary of the 31 January following the tax year in which the payment is released. (4) If section 809Y(1) does not apply to property by virtue of subsection (1), the income and gains treated under section 809X as not remitted to the United Kingdom continue to be treated after the compensation payment is released as not remitted to the United Kingdom even though the property has ceased to be exempt property. (5) But nothing in subsection (4) prevents anything done in relation to any part of the compensation payment after that payment is taken offshore (or used to make a qualifying investment) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is done. (6) Treat the compensation payment as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the amount of that kind of income or gain contained in the exempt property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X). (7) Where Condition A was met by using the compensation payment to make a qualifying investment— (a) the business investment provisions apply to the income and gains that continue, by virtue of subsection (4), to be treated as not remitted as they apply to income or gains that are treated under section 809VA(2) as not remitted, and (b) if the investment was made using more than just the compensation payment, treat only the part of the investment made using the payment as “the investment” for the purposes of those provisions.

5

• (1) Section 809Z (public access rule: general) is amended as follows.

• (2) In subsection (1), for “A to D” substitute “ B and C ”.

• (3) Omit subsection (2).

• (4) After subsection (8) insert—

(8A) But if the property is lost or stolen— (a) the relevant period ends with the time at which it is lost or stolen, and (b) a new relevant period begins with its importation or the time at which it is recovered.

• (5) Omit subsection (10).

6

Omit section 809Z1 (public access rule: relevant VAT relief).

7

• (1) Section 809Z4 (temporary importation rule) is amended as follows.

• (2) In subsection (1), after “days” insert “ (subject to any increase under subsection (3B)) ”.

• (3) In subsection (3)—

• (a) before paragraph (a) insert—

(za) the property meets the public access rule,

,

• (b) after paragraph (b) insert—

(ba) subsection (3A) applies to the property,

, and

• (c) in paragraph (d) for “or 809YC(2)” substitute “ , 809YC(2) or 809YF(4) ”.

• (4) After that subsection insert—

(3A) This subsection applies to the property if— (a) it is not available to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person because it has been lost, stolen or destroyed, (b) (if lost or stolen) it has not been recovered, and (c) no compensation payment has been released in respect of it. (3B) If— (a) property that has been lost or stolen is recovered, (b) the first day after the day on which it is recovered is a countable day, and (c) excluding that countable day there have already been 231 or more countable days in relation to the property, the number of countable days specified in subsection (1) is read as being increased by the number necessary for there to be 45 countable days beginning with the countable day mentioned in paragraph (b).

• (5) Omit subsections (4) to (10).

8

In section 809Z6 (exempt property: other interpretation), after subsection (4) insert—

(5) References to property being lost, stolen or destroyed are to the property being lost, stolen or destroyed whilst in the United Kingdom. (6) “Compensation payment”, in relation to property that has been lost, stolen or destroyed, means any payment of compensation (whether under an insurance policy or otherwise) in respect of the property. (7) A compensation payment is “released” on the day on which it first becomes available for use in the United Kingdom by or for the benefit of any relevant person. (8) Property that has been lost or stolen is “recovered” on the day on which it becomes available to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person.

9

The amendments made by paragraphs 3, 4, 5(4), 7(2), (3)(b) and (c) and (4) and 8 have effect in relation to property that is lost, stolen or destroyed on or after 6 April 2013.

10

The other amendments made by this Schedule have effect—

• (a) in relation to property that is not in the United Kingdom on 6 April 2013, as from that date, and

• (b) in relation to property that is in the United Kingdom on that date, as from the time when it ceases to be in the United Kingdom or is lost or stolen.

11

In the case of property that falls within paragraph 10(b) by virtue of being lost or stolen, any period that is a period of importation in relation to the property for the purposes of section 809Z4 of ITA 2007 ends with the time at which it is lost or stolen.

SCHEDULE 8

1

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

2

In section 476 (special rules: foreign policies) in subsection (2)—

• (a) after the entry relating to section 474(3) to (5) insert “ and ”,

• (b) omit the entry relating to section 528,

• (c) omit the “and” after the entry relating to sections 531 to 534, and

• (d) omit the entry relating to section 536(6).

3

For section 528 substitute—

(528) (1) Subsection (2) applies if— (a) an individual is liable for tax charged on a gain from a policy of life insurance or a capital redemption policy, and (b) there are one or more days in the material interest period on which the individual is not UK resident. (2) In determining the individual's liability for tax, the gain on which the tax is charged in the case of the individual is to be reduced by the appropriate fraction. (3) The appropriate fraction is— $$A B$where—A is the number of days in the material interest period which are days falling within subsection (1)(b), andB is the number of days in the material interest period.$ (4) In subsection (2) the reference to the gain is to be read in accordance with section 463A(4), 463D(4) or 463E(3) (which relates to restricted relief qualifying policies etc) if applicable. (5) In this section “the material interest period” means so much of the policy period as during which the individual meets condition A, B or C in section 465 in relation to the policy (subject to subsection (7)). (6) Subsections (7) and (8) apply if, before the chargeable event, there is an assignment falling within section 487(c) in relation to the policy where the individual is the assignee. (7) There is to be added to the material interest period any part of the policy period falling before the assignment— (a) during which the assignor meets condition A, B or C in section 465 in relation to the policy, and (b) which is not included in the material interest period under subsection (5). (8) In relation to any period added to the material interest period under subsection (7), in subsection (1)(b) the reference to the individual is to be read as a reference to the assignor. (9) For the purposes of subsections (5) and (7), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights. (10) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs. (11) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (10) the new policy is to be taken to have run— (a) from the issue of the other policy, or (b) if it also was a new policy in relation to an earlier policy, from the issue of the earlier policy, and so on; and in subsections (5) to (9) references to the policy are to be read accordingly as including any relevant earlier policy. (12) In subsection (11) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA. (528A) (1) Subsection (3) applies if— (a) personal representatives are liable for tax charged on a gain from a policy of life insurance or a capital redemption policy under section 466, and (b) there were one or more days in the material interest period on which the deceased was not UK resident. (2) Subsection (3) also applies if— (a) trustees are liable for tax charged on a gain from a policy of life insurance or a capital redemption policy under section 467 where— (i) of conditions A to D in that section, only condition B is met, and (ii) the absent settlor condition which is met is the one in subsection (4)(b) of that section (deceased settlor), (b) there were one or more days in the material interest period on which the deceased was not UK resident, and (c) the deceased was UK resident when the deceased died. (3) In determining the liability for tax of the personal representatives or trustees, the gain on which the tax is charged in the case of the personal representatives or trustees is to be reduced by the appropriate fraction. (4) The appropriate fraction is— $$A B$where—A is the number of days in the material interest period which are days falling within subsection (1)(b) or (2)(b) (as the case may be), andB is the number of days in the material interest period.$ (5) In subsection (3) the reference to the gain is to be read in accordance with section 463C(8) (which relates to restricted relief qualifying policies) if applicable. (6) In this section “the material interest period” means so much of the policy period falling before the deceased's death as during which the deceased met condition A, B or C in section 465 in relation to the policy (subject to subsection (8)). (7) Subsections (8) and (9) apply if, before the deceased's death, there was an assignment falling within section 487(c) in relation to the policy where the deceased was the assignee. (8) There is to be added to the material interest period any part of the policy period falling before the assignment— (a) during which the assignor met condition A, B or C in section 465 in relation to the policy, and (b) which is not included in the material interest period under subsection (6). (9) In relation to any period added to the material interest period under subsection (8), in subsection (1)(b) or (2)(b) the reference to the deceased is to be read as a reference to the assignor. (10) For the purposes of subsections (6) and (8), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights. (11) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs. (12) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (11) the new policy is to be taken to have run— (a) from the issue of the other policy, or (b) if it also was a new policy in relation to an earlier policy, from the issue of the earlier policy, and so on; and in subsections (6) to (10) references to the policy are to be read accordingly as including any relevant earlier policy. (13) In subsection (12) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.

4

Omit section 529 (exceptions to section 528).

5

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

• (2) In subsection (6) for the words from “from” to the end substitute “ reduced under section 528 in the case of the individual. ”

• (3) For subsection (7) substitute—

(7) If in the case of the individual the gain is reduced under section 528, for steps 1 and 3 in subsection (1) N is reduced by the number of complete years consisting wholly of days falling within section 528(1)(b) (including days falling within section 528(1)(b) by virtue of section 528(8)).

6

In section 552 of ICTA (information: duty of insurers) after subsection (13) insert—

(14) For the purposes of this section no account is to be taken of the effect of sections 528 and 528A of ITTOIA 2005.

7

• (1) The amendments made by this Schedule have effect in relation to—

• (a) any policy of life insurance issued in respect of an insurance made on or after 6 April 2013, or

• (b) any contract constituting a capital redemption policy made on or after that date.

• (2) The amendment made by paragraph 3 above has effect in relation to any insurance or contract made before 6 April 2013 if on or after that date—

• (a) the policy or contract is varied with the result that there is an increase in the benefits secured,

• (b) there is or was an assignment (or assignation) of rights, or a share of the rights, conferred by the policy or contract (whether or not for money's worth) to the individual or deceased, or

• (c) some or all of the rights conferred by the policy or contract become or became held as a security for a debt of the individual or deceased,

and the other amendments made by this Schedule have effect in relation to the insurance or contract accordingly.

• (3) For the purposes of sub-paragraph (2)(a) an exercise of rights conferred by a policy or contract is to count as a variation of the policy or contract.

• (4) In the case of a policy or contract treated under section 473A of ITTOIA 2005 as a single policy or contract, for the purposes of sub-paragraphs (1) and (2) the date on which the insurance or contract is made is the date on which, as the case may be—

• (a) the first insurance is made in respect of which the connected policies are issued, or

• (b) the first of the connected contracts is made.

SCHEDULE 9

PART 1 — Amendments of Schedule 15 to ICTA etc

1

Schedule 15 to ICTA (qualifying insurance policies) is amended as follows.

2

Before Part 1 insert—

(A1) (1) Sub-paragraph (2) applies if— (a) an event falling within sub-paragraph (3) occurs, (b) apart from sub-paragraph (2), the policy to which the event relates would be a qualifying policy after the event, and (c) an individual who is a beneficiary under that policy is in breach of the premium limit for qualifying policies. (2) That policy is not to be a qualifying policy after the event. (3) The events falling within this sub-paragraph are— (a) the issue of a policy in respect of an insurance made on or after 6 April 2013; (b) the variation of a policy on or after 6 April 2013 where as a result of the variation— (i) the period over which premiums are payable under the policy is or could be lengthened, or (ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased, or both; (c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below; (d) a deceased beneficiary event on or after 6 April 2013; (e) the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where— (i) the conditions are fulfilled for the first time on or after 6 April 2013, and (ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2). (4) An event does not fall within sub-paragraph (3) if— (a) the policy to which the event relates is— (i) a protected policy, (ii) a restricted relief qualifying policy, or (iii) a pure protection policy, (b) the event is the issue of a policy which is a new policy in relation to an earlier policy where— (i) the new policy is issued in substitution for the earlier policy (and not on its maturity), and (ii) the life assured under the new policy is different to the life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run, (c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4), (d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or (e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment. (5) In sub-paragraph (3)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. (6) A variation is to be ignored for the purposes of sub-paragraph (3)(b) if its effect is nullified before the end of the period of 3 months after the day on which the variation occurs. (7) Sub-paragraph (4)(a)(i) does not apply in the case of an event mentioned in sub-paragraph (3)(e). (8) Sub-paragraph (4)(a)(ii) does not apply in the case of— (a) an event mentioned in sub-paragraph (3)(c) or (d) occurring in relation to a restricted relief qualifying policy (“the assigned policy”), (b) any subsequent event relating to the assigned policy, or (c) any event relating to— (i) a later policy which is a new policy in relation to the assigned policy, or (ii) any policy which is a new policy in relation to the later policy, and so on. (9) In the case of an event mentioned in sub-paragraph (3)(b), sub-paragraph (4)(a)(iii) applies only if the policy is a pure protection policy both before and after the variation. (10) This paragraph is to be applied after all other provisions of this Schedule relevant to the question of whether a policy is a qualifying policy after an event have been applied. (A2) (1) Sub-paragraph (2) applies if— (a) an event falling within sub-paragraph (3) occurs, (b) the policy to which the event relates is a qualifying policy after the event, and (c) an individual who is a beneficiary under that policy is in breach of the premium limit for qualifying policies. (2) That policy is to be a restricted relief qualifying policy after the event. (3) The events falling within this sub-paragraph are— (a) a premium limit event in relation to a protected policy on or after 21 March 2012; (b) the issue of a policy as mentioned in paragraph A4(2)(b) below if, assuming that the substitution of the protected policy were instead a variation of that policy, there would be a premium limit event in relation to that policy; (c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a protected policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below; (d) a deceased beneficiary event on or after 6 April 2013 where the policy in question is a protected policy; (e) the issue of a policy in respect of an insurance made on or after 21 March 2012 but before 6 April 2013 otherwise than as mentioned in paragraph A4(2)(b) below; (f) the variation of a policy, other than a protected policy, on or after 21 March 2012 but before 6 April 2013 where as a result of the variation— (i) the period over which premiums are payable under the policy is or could be lengthened, or (ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased, or both; (g) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 below being fulfilled for the first time in respect of a new non-resident policy where— (i) the conditions are fulfilled for the first time on or after 21 March 2012 but before 6 April 2013, and (ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of sub-paragraph (2) of paragraph 24. (4) An event does not fall within sub-paragraph (3) if— (a) the policy to which the event relates is a pure protection policy, (b) the event is the issue of a policy which is a new policy in relation to an earlier policy where— (i) the new policy is issued in substitution for the earlier policy (and not on its maturity), and (ii) the life assured under the new policy is different to the life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run, (c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4), (d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or (e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment. (5) In sub-paragraph (3)(f)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. (6) A premium limit event or a variation is to be ignored for the purposes of sub-paragraph (3)(a) or (f) if its effect is nullified before 6 July 2013. (7) In the case of a premium limit event which occurs on or after 6 April 2013, in sub-paragraph (6) the reference to 6 July 2013 is to be read as a reference to the end of the period of 3 months after the day on which the premium limit event occurs. (8) In the case of an event mentioned in sub-paragraph (3)(a) or (f), sub-paragraph (4)(a) applies only if the policy is a pure protection policy both before and after the premium limit event or variation. (9) A “premium limit event” occurs in relation to a protected policy if— (a) the policy is varied or a relevant option is exercised so as to change the terms of the policy, and (b) as a result of the variation or exercise of the relevant option— (i) the period over which premiums are payable under the policy is or could be lengthened, or (ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased, or both. (10) A “premium limit event” also occurs in relation to a protected policy if on or after 6 April 2013— (a) the policy is varied or a relevant option is exercised so as to change the terms of the policy, and (b) as a result of the variation or exercise of the relevant option— (i) the period over which premiums are payable under the policy is or could be shortened, or (ii) the total amount of the premiums payable under the policy in any relevant period is or could be decreased, or both. (11) In sub-paragraphs (9)(b)(ii) and (10)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation or exercise of the relevant option. (12) The variation of, or exercise of a relevant option under, a protected policy is not a premium limit event in relation to the policy if— (a) the policy secures a capital sum payable either— (i) on survival for a specified term, or (ii) on earlier death or on earlier death or disability, (b) the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and (c) the policy is varied, or the relevant option is exercised, for that sole purpose. (13) In sub-paragraph (3)(g) references to paragraph 24 below are to that paragraph as it has effect before the appointed date for the purposes of section 55 of the Finance Act 1995. (14) A qualifying policy which is a new policy in relation to an earlier policy is a restricted relief qualifying policy if the earlier policy is a restricted relief qualifying policy. (15) A policy which is a restricted relief qualifying policy remains a restricted relief qualifying policy so long as it is a qualifying policy. (16) Paragraph A1 above is to be ignored in determining for the purposes of sub-paragraph (14) or (15) if a policy is a qualifying policy. This is subject to paragraph A1(8). (17) For further provision about restricted relief qualifying policies, see sections 463A to 463D of ITTOIA 2005. (A3) (1) For the purposes of paragraphs A1(1)(c) and A2(1)(c) above an individual is in breach of the premium limit for qualifying policies if the total amount of the premiums payable under relevant policies in any relevant period— (a) exceeds £3,600, or (b) could exceed £3,600 as a result of— (i) the exercise of any one or more relevant options conferred by one or more relevant policies, or (ii) so far as not covered by sub-paragraph (i), the application of one or more terms of one or more relevant policies relating to increases in premiums. (2) For the purposes of sub-paragraph (1)— (a) so much of a premium payable under a relevant policy as is charged on the grounds that an exceptional risk of death or disability is involved is to be left out of account in determining the premiums payable under the policy, (b) so much of the first premium payable under a relevant policy the liability for the payment of which— (i) is discharged in accordance with paragraph 15(2) below, or (ii) in the case of a policy in relation to which paragraph 3 below applies, is discharged under a provision of the policy falling within paragraph 3(4)(c), is to be left out of account in determining the premiums payable under the policy (subject to sub-paragraph (3) below), (c) in determining the premiums payable under a relevant policy any provision for the waiver of premiums by reason of a person's disability is to be ignored, and (d) “relevant period” means any period of 12 months beginning at or after the time when the event falling within paragraph A1(3) or A2(3) above (“the relevant event”) occurs. (3) The maximum amount that may be left out of account under sub-paragraph (2)(b) in the case of a relevant policy is— $$£ 3,600 × N$where N is the number of complete years for which ran—the other policy involved, orif there is more than one other policy involved, the policy which ran for the most number of complete years.$ (4) For the purposes of this paragraph the following are “relevant policies”— (a) the policy to which the relevant event relates, and (b) any other policy— (i) which is a qualifying policy, and (ii) under which the individual is a beneficiary. (5) But neither a protected policy nor a pure protection policy is to be a relevant policy by virtue of sub-paragraph (4)(b). (6) Sub-paragraph (7) applies if this paragraph is to be applied in the case of an individual in consequence of two or more events occurring at the same time (including where one or more of the events falls within paragraph A1(3) above and one or more of the events falls within paragraph A2(3) above). (7) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, sub-paragraph (4)(a) has effect as if the reference to the policy to which the relevant event relates were a reference to all the policies to which the events, taken together, relate. (8) But sub-paragraph (7) does not apply, and sub-paragraph (9) applies instead, if— (a) all the policies in question are policies issued by the same issuer, and (b) each of them has an unique identifier in a series of unique identifiers which the issuer gives to policies issued by it. (9) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, an event relating to a policy (“policy A”) is treated as occurring before an event relating to another policy (“policy B”) if, in the issuer's series of unique identifiers, policy A's unique identifier comes before policy B's unique identifier. (A4) (1) This paragraph applies for the purposes of this Part of this Schedule. (2) A policy is “protected” if— (a) it is issued in respect of an insurance made before 21 March 2012, or (b) it is issued in respect of an insurance made on or after 21 March 2012 where— (i) it is a new policy in relation to an earlier policy, (ii) it is issued in substitution for the earlier policy (and not on its maturity), and (iii) the earlier policy is a protected policy (whether by virtue of paragraph (a) or this paragraph). (3) A policy which is protected ceases to be protected if it becomes a restricted relief qualifying policy. (4) A policy issued as mentioned in sub-paragraph (2)(b) is not protected if— (a) its issue is an event falling within paragraph A2(3) above, and (b) after that event it is a restricted relief qualifying policy. (A5) (1) This paragraph applies for the purposes of this Part of this Schedule in determining if an individual is a beneficiary under a policy. (2) An individual is a beneficiary under a policy if the individual beneficially owns— (a) any rights under the policy, or (b) any share in any rights under the policy. (3) An individual is a beneficiary under a policy if— (a) any rights under the policy are, or any share in any rights under the policy is, held on non-charitable trusts created by the individual, and (b) those rights are, or that share is, not beneficially owned by any individual. (4) The following provisions of ITTOIA 2005 apply for the purposes of sub-paragraph (3)(a)— (a) section 465(6), and (b) the definition of “non-charitable trust” in section 545(1). (5) An individual is a beneficiary under a policy if— (a) any rights under the policy are, or any share in any rights under the policy is, held as security for a debt of the individual, and (b) those rights are, or that share is, not beneficially owned by any individual. (A6) (1) In this Part of this Schedule— (a) “new policy” has the meaning given in paragraph 17 below, (b) references to the variation of a policy are to a variation in relation to which paragraph 18 below applies, (c) “pure protection policy” means a policy— (i) which has no surrender value and is not capable of acquiring a surrender value, or (ii) under which the benefits payable cannot exceed the amount of the premiums paid except on death or in respect of disability, and (d) “relevant option”, in relation to a policy, means an option conferred by the policy on the person to whom it is issued to have another policy substituted for it or to have any of its terms changed. (2) For the purposes of this Part of this Schedule a “deceased beneficiary event” occurs if, in connection with the death of an individual (“D”) who was a beneficiary under a policy, an individual (“B”) becomes a beneficiary under that policy by reference (wholly or partly) to any rights, or to any share in any rights, by reference to which D was a beneficiary (wholly or partly). For this purpose, it does not matter if B is already a beneficiary under the policy. (3) For the purposes of this Part of this Schedule an assignment is a “mortgage endowment assignment” if— (a) the policy to which the assignment relates secures a capital sum payable either— (i) on survival for a specified term, or (ii) on earlier death or on earlier death or disability, (b) the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and (c) when the assignment occurs, it is intended that the policy will continue to be maintained for that sole purpose.

3

At the beginning of Part 1 (qualifying conditions) insert—