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SCHEDULE 7 continued PART 2 continued
(3) If the settlement does not have a Schedule 4C pool at the beginning of the year of the transfer, this Schedule applies in relation to the further transfer as it applied in relation to the original transfer.
(4) For the purposes of this paragraph a settlement has a Schedule 4C pool until the end of the tax year in which all section 2(2) amounts in the pool have been reduced to nil.”
138 For paragraph 8 substitute—
“8 (1) Chargeable gains are treated as accruing in a tax year (“the relevant tax year”) to a beneficiary who has received a capital payment from the trustees of a relevant settlement in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount in the Schedule 4C pool for the relevant tax year or any earlier tax year.
(2) The amount of chargeable gains treated as accruing is equal to—
(a) the amount of the capital payment, or
(b) if only part of the capital payment is matched, the amount of that part.
(3) Section 87A applies for a tax year for the purposes of matching capital payments received from the trustees of a relevant settlement with section 2(2) amounts in the Schedule 4C pool as if—
(a) references to section 2(2) amounts were to section 2(2) amounts in the Schedule 4C pool,
(b) references to a capital payment received from the trustees by a beneficiary were to a capital payment received from the trustees of a relevant settlement by a beneficiary who is chargeable to tax for that year, and
(c) for section 87A(3)(b) there were substituted—
“(b) all section 2(2) amounts in the Schedule 4C pool have been reduced to nil.”
(4) Section 87A applies for a tax year by virtue of this paragraph before it applies for that year otherwise than by virtue of this paragraph; but this is subject to sub-paragraph (5).
(5) If section 87A applies for a tax year by virtue of section 762(3) of the Taxes Act (offshore income gains), it applies for that year by virtue of that provision before it applies for that year by virtue of this paragraph.”
139 After paragraph 8A insert—
8AA Section 87B (remittance basis) applies in relation to chargeable gains treated under paragraph 8 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.”
140 Omit paragraphs 8B and 8C (including the heading before paragraph 8B).
141 For paragraph 9 (and the heading before it) substitute—
9 (1) For the purposes of paragraph 8 (and section 87A as it applies for the purposes of that paragraph), no account is to be taken of a capital payment to which any of sub-paragraphs (2) to (4) applies (or a part of a capital payment to which sub-paragraph (4) applies).
(2) This sub-paragraph applies to a capital payment received before the tax year preceding the tax year in which the original transfer is made.
(3) This sub-paragraph applies to a capital payment that—
(a) is received by a beneficiary of a settlement from the trustees in a tax year during the whole of which the trustees—
(i) are resident and ordinarily resident in the United Kingdom, and
(ii) are not Treaty non-resident,
(b) was made before any transfer of value to which Schedule 4B applies was made, and
(c) was not made in anticipation of the making of any such transfer of value or of chargeable gains accruing under that Schedule.
(4) This sub-paragraph applies to a capital payment if (and to the extent that) it is received (or treated as received) in a tax year from the trustees by a company that—
(a) is not resident in the United Kingdom in that year, and
(b) would be a close company if it were resident in the United Kingdom,
(and is not treated under any of subsections (3) to (5) of section 96 as received by another person).”
142 In paragraph 10 (residence of trustees from whom capital payment received)—
(a) in sub-paragraph (1), for “sub-paragraph (2) below” substitute “paragraph 9(3)”, and
(b) omit sub-paragraphs (2) and (3).
143 (1) Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended as follows.
(2) For sub-paragraphs (1) to (3) substitute—
“(1) This paragraph applies if—
(a) by virtue of section 10A, an amount of chargeable gains within section 86(1)(e) that accrued in an intervening year to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the year of return, and
(b) after paragraph 8 has applied for the year of return, the section 2(2) amount for the intervening year that is in the Schedule 4C pool for the settlement is less than the amount mentioned in paragraph (a).
(2) The amount of chargeable gains treated as mentioned in sub-paragraph (1)(a) as accruing to the settlor in the year of return is limited to the section 2(2) amount referred to in sub-paragraph (1)(b).”
144 In paragraph 12A(3), for “87(4)” substitute “87(2)”.
145 (1) Paragraph 13 (increase in tax payable under this Schedule) is amended as follows.
(2) For sub-paragraph (1) substitute—
“(1) This paragraph applies if—
(a) chargeable gains are treated under paragraph 8 as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”), and
(b) the beneficiary is charged to tax by virtue of the matching.
(1A) Where part of a capital payment is matched, references in sub-paragraphs (2) and (3) to the capital payment are to the part matched.”
(3) In sub-paragraph (5)(a), for the words from “year of assessment” to the end (excluding the “and”) substitute “tax year immediately after the relevant tax year,”.
146 Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.
147 The amendments made by paragraphs 128 to 146 have effect in relation to transfers of value to which Schedule 4B to TCGA 1992 applies that are made on or after 6 April 2008.
148 For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 (and section 87A of that Act as it applies for the purposes of that paragraph), no account is to be taken of any capital payment received before 21 March 2000.
149 A capital payment received before 6 April 2008 is not within paragraph 9(4) of Schedule 4C to TCGA 1992 (if it otherwise would be).
150 Paragraph 124 applies in relation to chargeable gains treated under paragraph 8 of Schedule 4C to TCGA 1992 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.
151 (1) This paragraph applies for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”) if—
(a) an individual who was resident or ordinarily resident, but not domiciled, in the United Kingdom in the tax year 2007-08 received a capital payment from the trustees of a settlement on or after 12 March 2008 but before 6 April 2008, and
(b) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.
(2) For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 as it applies for the relevant tax year (and section 87A of that Act as it applies for those purposes), no account is to be taken of the capital payment.
152 Schedule 4C to TCGA 1992 (as it has effect without the amendments made by paragraphs 128 to 146) applies for the tax year 2008-09 and subsequent tax years in relation to Schedule 4C pools created before 6 April 2008 (“existing Schedule 4C pools”) as if paragraphs 7B and 9(2) were omitted.
153 Any reduction in the amount of a capital payment has effect for the purposes of Schedule 4C to TCGA 1992 as it applies in relation to existing Schedule 4C pools (as well as for other purposes).
154 (1) If all of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced to nil.
(2) If part of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced by the amount of that part.
(3) A capital payment “ceases to be available” in a tax year if and to the extent that, by reason of the capital payment, chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in that year to the recipient.
(4) If—
(a) chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in a tax year,
(b) more than one capital payment that the beneficiary has received is taken into account for the purposes of determining the amount of chargeable gains treated as accruing to the beneficiary, and
(c) the amount of the chargeable gains is less than the total amount of capital payments taken into account,
sub-paragraph (3) applies in relation to earlier capital payments before later ones.
155 In any tax year—
(a) Schedule 4C to TCGA 1992 (as amended by paragraphs 128 to 146) applies in relation to a settlement before that Schedule (as it has effect without those amendments) applies in relation to the settlement, and
(b) that Schedule (as it has effect without those amendments) applies in relation to the settlement before section 87 or 89(2) of that Act applies in relation to the settlement.
156 In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—
(a) omit the “and” at the end of paragraph (f), and
(b) at the end of paragraph (g) insert—
“(h) section 670A of ITA 2007 (accrued income profits),”.
157 In section 617 of ITA 2007 (accrued income profits: income charged), after subsection (6) insert—
“(7) Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis).”
158 Omit section 644 of that Act (accrued income profits: individuals to whom remittance basis applies).
159 After section 670 of that Act insert—
(1) This section applies if—
(a) accrued income profits are made by an individual as a result of a transfer of foreign securities, and
(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the tax year in which the profits are made.
(2) Treat the accrued income profits as relevant foreign income of the individual.
(3) For the purposes of Chapter A1 of Part 14 (remittance basis)—
(a) if the individual is the transferor—
(i) treat any consideration for the transfer as deriving from the accrued income profits, and
(ii) if on the transfer the individual does not receive consideration of an amount equal to (or exceeding) the market value of the securities, treat the securities as deriving from the accrued income profits, and
(b) if the individual is the transferee, treat the securities as deriving from the accrued income profits.
(4) For the purposes of this section securities are “foreign” if income from them would be relevant foreign income.”
160 The amendments made by paragraphs 156 to 159 have effect in relation to transfers of securities where the settlement day is on or after 6 April 2008.
161 In section 46B(4)(c) of TMA 1970 (questions to be determined by Special Commissioners), for “sections 720, 727 and 731” substitute “any provision of Chapter 2 of Part 13”.
162 In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”), after paragraph (h) insert “and
(i) sections 726, 730 and 735 of that Act (transfer of assets abroad: foreign deemed income).”
163 ITA 2007 is amended as follows.
164 In section 720(4) (transfer of assets abroad: charge where power to enjoy income), after “abroad)” insert “and section 726 (non-UK domiciled individuals to whom remittance basis applies)”.
165 For section 726 substitute—
(1) This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if—
(a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and
(b) the individual is not domiciled in the United Kingdom in the year.
(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual's.
(3) Treat the foreign deemed income as relevant foreign income of the individual.
(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual’s as deriving from the foreign deemed income.”
166 In section 727 (transfer of assets abroad: charge where capital sums received), after subsection (3) insert—
“(3A) But see section 730 (non-UK domiciled individuals to whom remittance basis applies).”
167 For section 730 substitute—
(1) This section applies in relation to income treated under section 728 as arising to an individual in a tax year (“the deemed income”) if—
(a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and
(b) the individual is not domiciled in the United Kingdom in the year.
(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 728(1)(a) would be relevant foreign income if it were the individual's.
(3) Treat the foreign deemed income as relevant foreign income of the individual.
(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 728(1)(a) as would be relevant foreign income if it were the individual’s as deriving from the foreign deemed income.”
168 In section 731 (transfer of assets abroad: charge where benefit received), after subsection (2) insert—
“(2A) But see section 735 (non-UK domiciled individuals to whom remittance basis applies).”
169 For section 735 substitute—
(1) This section applies if—
(a) income is treated under section 732 as arising to an individual in a tax year (“the deemed income”),
(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and
(c) the individual is not domiciled in the United Kingdom in the year.
(2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the relevant income to which it relates would be relevant foreign income if it were the individual's.
(3) Treat the foreign deemed income as relevant foreign income of the individual.
(4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat relevant income, or a benefit, that relates to any part of the foreign deemed income as deriving from that part of the foreign deemed income.
(1) For the purposes of section 735—
(a) place the benefits mentioned in Step 1 in the order in which they were received by the individual (starting with the earliest benefit received),
(b) deduct from those benefits so much of any benefit within section 734(1)(b) as gives rise as mentioned in section 734(1)(d) to chargeable gains or offshore income gains,
(c) place the income mentioned in Step 3 for the tax years mentioned in Step 4 (“the relevant income”) in the order determined under subsection (3),
(d) deduct from that income any income that may not be taken into account because of section 743(1) or (2) (no duplication of charges),
(e) place the income treated under section 732(2) as arising to the individual in respect of the benefits in the order in which it is treated as arising (starting with the earliest income treated as having arisen), and
(f) treat the income mentioned in paragraph (e) as related to—
(i) the benefits, and
(ii) the relevant income,
by matching that income with the benefits and the relevant income (in the orders mentioned in paragraphs (a), (c) and (e)).
(2) In subsection (1) references to a step are to a step in section 733(1).
(3) The order referred to in subsection (1)(c) is arrived at by taking the following steps.
Step 1
Find the relevant income for the earliest tax year (of the tax years referred to in subsection (1)(c)).
Step 2
Place so much of that income as is not foreign in the order in which it arose (starting with the earliest income to arise).
Step 3
After that, place so much of that income as is foreign in the order in which it arose (starting with the earliest income to arise).
Step 4
Repeat Steps 1 to 3.
For this purpose, read references to the relevant income for the earliest tax year as references to the relevant income for the first tax year after the last tax year in relation to which those Steps have been undertaken.
(4) For the purposes of subsection (3) relevant income is “foreign” where it would be relevant foreign income if it were the individual's.
(5) For those purposes treat income for a period as arising immediately before the end of the period.
(6) Subsection (1)(d) does not apply if the income may not be taken into account because the individual has been charged to income tax under section 731 by reason of the income.”
170 The amendments made by paragraphs 161 to 169 have effect for the tax year 2008-09 and subsequent tax years.
171 For the purposes of this Part of this Schedule, the market value of any asset is its market value for the purposes of TCGA 1992.
Finance Act 2008