Office of Public Sector Information
PART 13 continued CHAPTER 1 continued
(1) A person on whom a counteraction notice has been served may appeal to the Special Commissioners on the grounds that—
(a) section 684 (person liable to counteraction of income tax advantage) does not apply to the person in respect of the transaction or transactions in question, or
(b) the adjustments directed to be made are inappropriate.
(2) Such an appeal may be made only by giving notice to the Commissioners for Her Majesty’s Revenue and Customs within 30 days of the service of the counteraction notice.
(3) On an appeal under this section the Special Commissioners may—
(a) affirm, vary or cancel the counteraction notice, or
(b) affirm, vary or quash an assessment made in accordance with the notice.
(4) But the bringing of an appeal under this section (or a request for its rehearing under section 706) does not affect—
(a) the validity of the counteraction notice, or
(b) the validity of any other thing done under or in accordance with section 698 (counteraction notices),
pending the determination of the proceedings.
(1) The appellant or an officer of Revenue and Customs may, if dissatisfied with the determination of the Special Commissioners under section 705, require the appeal to be reheard by the tribunal appointed under section 704.
(2) Such a request may be made only by giving notice to the Clerk to the Special Commissioners within 30 days after the determination.
(3) If such a request is made—
(a) the Special Commissioners must transmit to the tribunal any document in their possession which was delivered to them for the purposes of the appeal, and
(b) the tribunal must rehear and determine the appeal.
(4) The tribunal has the same powers in relation to the appeal as the Special Commissioners.
(5) On the rehearing of an appeal under this section, the tribunal may—
(a) affirm, vary or cancel the counteraction notice, or
(b) affirm, vary or quash an assessment made in accordance with the notice.
(6) The tribunal’s determination is final and conclusive (but see sections 707 to 711).
(1) This section applies if the appellant or an officer of Revenue and Customs (“the dissatisfied party”) is dissatisfied with the tribunal’s determination under section 706 on the rehearing of an appeal as being wrong in law.
(2) The dissatisfied party may, within 30 days after the determination, by notice in writing require the tribunal to state and sign a case for the opinion of the High Court or in Scotland the Court of Session.
(3) The dissatisfied party is entitled to have the case stated only on payment of a fee of £25 to the tribunal.
(4) The case must set out the facts and the determination of the tribunal.
(5) The dissatisfied party must—
(a) within 30 days after receiving the stated and signed case, transmit it to the High Court or in Scotland the Court of Session, and
(b) not later than transmitting the case, send to the other party—
(i) notice in writing that the case has been stated on the dissatisfied party’s application, and
(ii) a copy of the case.
(6) The statement of a case under this section does not affect—
(a) the validity of the counteraction notice, or
(b) the validity of any other thing done under or in accordance with section 698 (counteraction notices),
pending the determination of the proceedings.
(7) In this section and sections 708 to 710 references to the Court of Session are references to the Court of Session sitting as the Court of Exchequer.
(1) The High Court or in Scotland the Court of Session must hear and determine any question of law arising on a case transmitted to the Court under section 707(5).
(2) The Court may—
(a) affirm, reverse or amend the determination in respect of which the case has been stated,
(b) remit the matter to the tribunal with the Court’s opinion on it, or
(c) make such other order about the matter as it considers appropriate.
(3) The Court may send the case back for amendment.
(4) A case sent back for amendment must be amended accordingly, and judgment must be delivered after it has been amended.
(1) This section applies if the tribunal has made a determination under section 706 about an assessment and a case—
(a) has been required to be stated about it under section 707(2), or
(b) is pending before the High Court or the Court of Session.
(2) Income tax must be paid in accordance with the determination except so far as subsection (3) or (4) applies.
(3) If the amount charged is reduced by the order or judgment of the Court, the overpaid tax must be refunded with such interest, if any, as the Court may allow.
(4) If the amount charged is increased by the order or judgment, an officer of Revenue and Customs must issue the person assessed with a notice of the total amount payable in accordance with the order or judgment.
(5) The tax undercharged is due and payable at the end of the period of 30 days beginning with the date on which the notice is issued.
(1) In the case of a decision under section 708 of the High Court, an appeal lies to the Court of Appeal and from there to the Supreme Court.
(2) But that is subject to subsection (3) and to Part 2 of the Administration of Justice Act 1969 (c. 58) (appeal from High Court to Supreme Court).
(3) No appeal lies to the Supreme Court from the Court of Appeal except with the leave of the Court of Appeal or the Supreme Court.
(4) In the case of a decision under section 708 of the Court of Session, an appeal lies to the Supreme Court.
(1) A case which is stated by the tribunal under section 707 (statement of case by tribunal for opinion of High Court or Court of Session) in proceedings in Northern Ireland is a case for the opinion of the Court of Appeal in Northern Ireland.
(2) The Income Tax Acts and TMA 1970 have effect as if—
(a) section 707 applied in relation to such proceedings with the omission of subsections (4) and (5), and
(b) that section and sections 708 and 709 applied in relation to such proceedings with the substitution of references to the Court of Appeal in Northern Ireland for references to the High Court.
(3) The procedure relating to—
(a) transmitting the case to the Court of Appeal in Northern Ireland, and
(b) the hearing and determination of the case by that Court,
is that for the time being in force in Northern Ireland as respects cases stated by a county court in exercise of its general jurisdiction.
(4) An appeal lies from the Court of Appeal in Northern Ireland to the Supreme Court in accordance with section 42 of the Judicature (Northern Ireland) Act 1978 (c. 23).
(5) If in proceedings in Northern Ireland an application is made for a case to be stated by the tribunal under section 707 as applied by this section, the case must be settled and sent to the applicant as soon after the application as is reasonably practicable.
(6) In this section “proceedings in Northern Ireland” means proceedings as respects which the place given by the rules in Schedule 3 to TMA 1970 is in Northern Ireland.
(1) This section applies if an individual to whom section 684 (person liable to counteraction of income tax advantage) applies (or may apply) has died.
(2) Any notice or notification to the individual under this Chapter may be given to the individual’s personal representatives.
(3) The provisions of this Chapter relating to any such notice or notification, to the making of a statutory declaration, to rights of appeal and to the giving of information must be read accordingly.
In this Chapter—
“company” includes any body corporate,
“dividends” includes references to other qualifying distributions and to interest,
“securities”—
includes shares and stock, and
in relation to a company not limited by shares (whether or not it has a share capital) also includes a reference to the interest of a member of the company as such, whatever the form of that interest,
“trading stock” has the meaning given by section 174 of ITTOIA 2005, and
“transaction in securities” means transactions, of whatever description, relating to securities, and in particular—
the purchase, sale or exchange of securities,
issuing or securing the issue of new securities,
applying or subscribing for new securities, and
altering or securing the alteration of the rights attached to securities.
(1) This Chapter imposes a charge to income tax on—
(a) individuals to whom income is treated as arising under section 721 (individuals with power to enjoy income as a result of relevant transactions),
(b) individuals to whom income is treated as arising under section 728 (individuals receiving capital sums as a result of relevant transactions), and
(c) individuals to whom income is treated as arising under section 732 (non-transferors receiving a benefit as a result of relevant transactions).
(2) The charges apply only if a relevant transfer occurs, and they operate by reference to income of a person abroad that is connected with the transfer or another relevant transaction.
(3) For the meaning of “relevant transaction”, “relevant transfer” and “person abroad”, see sections 715, 716 and 718 respectively.
(4) In this Chapter references to individuals include their spouses or civil partners.
(1) A transaction is a relevant transaction for the purposes of this Chapter if it is—
(a) a relevant transfer, or
(b) an associated operation.
(2) For the meaning of “relevant transfer” and “associated operation”, see sections 716 and 719 respectively.
(1) A transfer is a relevant transfer for the purposes of this Chapter if—
(a) it is a transfer of assets, and
(b) as a result of—
(i) the transfer,
(ii) one or more associated operations, or
(iii) the transfer and one or more associated operations,
income becomes payable to a person abroad.
(2) In this Chapter “transfer”, in relation to rights, includes the creation of the rights.
(3) For the meaning of “assets”, see section 717.
In this Chapter—
(a) “assets” includes property or rights of any kind, and
(b) references to assets representing any assets, income or accumulations of income include references to—
(i) shares in or obligations of any company to which the assets, income or accumulations are or have been transferred, or
(ii) obligations of any other person to whom the assets, income or accumulations are or have been transferred.
(1) In this Chapter “person abroad” means a person who is resident or domiciled outside the United Kingdom.
(2) For the purposes of this Chapter, the following persons are treated as resident outside the United Kingdom—
(a) a UK resident body corporate that is incorporated outside the United Kingdom,
(b) the person treated as neither UK resident nor ordinarily UK resident under section 475(3) (trustees of settlements), and
(c) persons treated as non-UK resident under section 834(4) (personal representatives).
(1) In this Chapter “associated operation”, in relation to a transfer of assets, means an operation of any kind effected by any person in relation to—
(a) any of the assets transferred,
(b) any assets directly or indirectly representing any of the assets transferred,
(c) the income arising from any assets within paragraph (a) or (b), or
(d) any assets directly or indirectly representing the accumulations of income arising from any assets within paragraph (a) or (b).
(2) It does not matter whether the operation is effected before, after or at the same time as the transfer.
(1) The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are ordinarily UK resident by means of relevant transfers.
(2) Income tax is charged on income treated as arising to such an individual under section 721 (individuals with power to enjoy income as a result of relevant transactions).
(3) Tax is charged under this section on the amount of income treated as arising in the tax year.
(4) But see section 724 (special rules where benefit provided out of income of person abroad).
(5) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.
(6) For rules about the reduction in the amount charged in some circumstances and the availability of deductions and reliefs, see—
section 725 (reduction in amount charged where controlled foreign company involved), and
section 746 (deductions and reliefs where individual charged under this section or section 727).
(7) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction).
(1) Income is treated as arising to such an individual as is mentioned in section 720(1) in a tax year for income tax purposes if conditions A and B are met.
(2) Condition A is that the individual has power in the tax year to enjoy income of a person abroad as a result of—
(a) a relevant transfer,
(b) one or more associated operations, or
(c) a relevant transfer and one or more associated operations.
(3) Condition B is that the income would be chargeable to income tax if it were the individual’s and received by the individual in the United Kingdom.
(4) For the purposes of subsection (2), it does not matter whether the income may be enjoyed immediately or only later.
(5) It does not matter for the purposes of this section—
(a) whether the income would be chargeable to income tax apart from section 720,
(b) whether the individual is ordinarily UK resident at the time when the relevant transfer is made, or
(c) whether the avoiding of liability to income tax is a purpose for which the transfer is effected.
(6) For the circumstances in which an individual is treated as having the power to enjoy income for the purposes of this section, see section 722.
(1) For the purposes of section 721, an individual is treated as having power to enjoy income of a person abroad if any of the enjoyment conditions are met.
(2) In subsection (1) “the enjoyment conditions” means conditions A to E as specified in section 723.
(3) In determining whether an individual has power to enjoy income for the purposes of section 721, regard must be had to the substantial result and effect of all the relevant transactions.
(4) In making that determination all benefits which may at any time accrue to the individual as a result of the transfer and any associated operations must be taken into account, irrespective of—
(a) the nature or form of the benefits, or
(b) whether the individual has legal or equitable rights in respect of the benefits.
(1) Condition A is that the income is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of the individual, whether in the form of income or not.
(2) Condition B is that the receipt or accrual of the income operates to increase the value to the individual—
(a) of any assets the individual holds, or
(b) of any assets held for the individual’s benefit.
(3) Condition C is that the individual receives or is entitled to receive at any time any benefit provided or to be provided out of the income or related money.
(4) In subsection (3) “related money” means money which is or will be available for the purpose of providing the benefit as a result of the effect or successive effects—
(a) on the income, and
(b) on any assets which directly or indirectly represent the income,
of the associated operations referred to in section 721(2).
(5) Condition D is that the individual may become entitled to the beneficial enjoyment of the income if one or more powers are exercised or successively exercised.
(6) For the purposes of subsection (5) it does not matter—
(a) who may exercise the powers, or
(b) whether they are exercisable with or without the consent of another person.
(7) Condition E is that the individual is able in any manner to control directly or indirectly the application of the income.
(1) This section applies if an individual has power to enjoy income of a person abroad for the purposes of section 721 because of receiving any such benefit as is referred to in section 723(3) (benefit provided out of income of person abroad).
(2) Despite anything in section 720, the individual is liable to income tax under that section for the tax year in which the benefit is received on the whole of the amount or value of that benefit.
(3) But subsection (2) does not apply so far as it is shown that the benefit derives directly or indirectly from income on which the individual has already been charged to income tax for that tax year or a previous tax year.
(1) This section applies if—
(a) an amount of the chargeable profits for an accounting period of a company (“the controlled foreign company”) is apportioned to one or more UK resident companies under section 747(3) of ICTA (imputation of chargeable profits and creditable tax of controlled foreign companies),
(b) as a result of section 747(4) of that Act those companies are chargeable in respect of the amount (“the chargeable amount”) of the chargeable profits so apportioned to them, and
(c) apart from this section, the amount of income treated as arising to an individual under section 721 for a tax year would be or include a sum forming part of the controlled foreign company’s chargeable profits for that accounting period.
(2) The amount of income so treated is reduced by—
where—
S is the sum forming part of the controlled foreign company’s chargeable profits for that accounting period,
CA is the chargeable amount, and
CP is the controlled foreign company’s chargeable profits for that accounting period.
(3) The following provisions of ICTA apply for the purposes of this section as they apply for the purposes of Chapter 4 of Part 17 of that Act—
section 747(6) (interpretation, in relation to a non-UK resident company, of references to chargeable profits for an accounting period and profits), and
section 751(1) to (5A) (accounting periods).
(1) An individual is not chargeable to income tax under section 720 in respect of any income treated as arising to the individual under section 721 if conditions A and B are met.
(2) Condition A is that the individual is domiciled outside the United Kingdom.
(3) Condition B is that if the income had in fact been the individual’s income, because of being so domiciled the individual would not have been chargeable to income tax in respect of it.
(1) The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are ordinarily UK resident by means of relevant transfers.
(2) Income tax is charged on income treated as arising to such an individual under section 728 (individuals receiving capital sums as a result of relevant transactions).
(3) Tax is charged under this section on the amount of income treated as arising in the tax year.
(4) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.
(5) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction).
(6) For rules about the availability of deductions and reliefs where income is charged under this section, see section 746 (deductions and reliefs where individual charged under section 720 or this section).
(1) Income is treated as arising to such an individual as is referred to in section 727(1) in a tax year for income tax purposes if—
(a) income has become the income of a person abroad as a result of—
(i) a relevant transfer,
(ii) one or more associated operations, or
(iii) a relevant transfer and one or more associated operations, and
(b) the capital receipt conditions are met in respect of the individual in the tax year (see section 729).
(2) Section 725 (reduction in amount charged where controlled foreign company involved) applies for determining the amount of income treated as arising under subsection (1) as it applies for determining the amount so treated under section 721(1).
(3) It does not matter for the purposes of this section—
(a) whether the income would be chargeable to income tax apart from section 727,
(b) whether the individual is ordinarily UK resident at the time when the relevant transfer abroad is made, or
(c) whether the avoiding of liability to income tax is a purpose for which that transfer is effected.
(1) For the purposes of section 728(1), the capital receipt conditions are met in respect of the individual in a tax year (“the relevant year”) if—
(a) either—
(i) in the relevant year the individual receives or is entitled to receive any capital sum, whether before or after the relevant transfer, or
(ii) in any earlier tax year the individual has received any capital sum, whether before or after the relevant transfer, and
(b) the payment of that sum is (or, in the case of an entitlement, would be) in any way connected with any relevant transaction.
(2) But subsection (1)(a)(ii) does not apply merely because of the receipt of a sum by way of loan if the loan is wholly repaid before the relevant year begins.
(3) In subsection (1) “capital sum” means—
(a) any sum paid or payable by way of loan or repayment of a loan, and
(b) any other sum paid or payable—
(i) otherwise than as income, and
(ii) not for full consideration in money or money’s worth.
(4) For the purposes of subsection (1), a sum is treated as a capital sum which the individual (“A”) receives or is entitled to receive if another person receives or is entitled to receive it—
(a) at A’s direction, or
(b) as a result of the assignment by A of A’s right to receive it.
(1) An individual is not chargeable to income tax under section 727 in respect of any income treated as arising to the individual under section 728 if conditions A and B are met.
(2) Condition A is that the individual is domiciled outside the United Kingdom.
(3) Condition B is that if the income had in fact been the individual’s income, because of being so domiciled the individual would not have been chargeable to income tax in respect of it.
(1) Income tax is charged on income treated as arising to an individual under section 732 (non-transferors receiving a benefit as a result of relevant transactions).
(2) Tax is charged under this section on the amount of income treated as arising for the tax year.
(3) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.
(4) For exemptions from the charge under this section, see sections 736 to 742 (exemptions where no tax avoidance purpose or genuine commercial transaction).
(1) This section applies if—
(a) a relevant transfer occurs,
(b) an individual who is ordinarily UK resident receives a benefit,
(c) the benefit is provided out of assets which are available for the purpose as a result of—
(i) the transfer, or
(ii) one or more associated operations,
(d) the individual is not liable to income tax under section 720 or 727 by reference to the transfer and would not be so liable if the effect of sections 726 and 730 were ignored, and
(e) the individual is not liable to income tax on the amount or value of the benefit (apart from section 731).
(2) Income is treated as arising to the individual for income tax purposes for any tax year for which section 733 provides that income arises.
(3) Also see that section for the amount of income treated as arising for any such tax year.
Income Tax Act 2007