Finance Act 1998

Section 547

1(1)Section 547 of the Taxes Act 1988 (method of charging gain to tax) shall be amended as follows.

(2)In paragraph (a) of subsection (1) (individuals) the words from “(including” to “1964)” (which are superseded by the new subsection (14)) shall cease to have effect.

(3)After paragraph (c) of subsection (1), there shall be added—

“(d)if, immediately before the happening of that event,—

(i)those rights were held on trusts, and the person who created the trusts was not resident in the United Kingdom or had died or (in the case of a company or foreign institution) had been dissolved or wound up or had otherwise come to an end, or

(ii)those rights were held as security for a debt owed by trustees,

subsection (9) or (10) below (as the case may be) shall apply in relation to the amount of the gain;

(e)if, immediately before the happening of that event, those rights—

(i)were in the beneficial ownership of a foreign institution, or

(ii)were held as security for a debt owed by a foreign institution,

subsection (11) below shall apply in relation to the amount of the gain.”

(4)Subsection (3) (which relates to cases where there are two or more beneficial owners, settlors or debtors and which is superseded by the new section 547A) shall cease to have effect.

(5)In subsection (4), for “subsections (1) and (3) above” there shall (in consequence of sub-paragraph (4) above) be substituted “subsection (1) above”.

(6)In subsection (5) (tax treatment where a sum is included in an individual’s total income by virtue of subsection (1)) for “subsection (1)” there shall be substituted “subsection (1)(a)”.

(7)After subsection (5) there shall be inserted—

“(5AA)If, in a case falling within subsection (1)(d) above, a sum forms part of the income of trustees by virtue of subsection (9)(a) below, subsection (5) above shall (subject to subsections (6) and (7) below and section 553(6)) apply in relation to the trustees and that sum—

(a)as it applies in relation to an individual and a sum included in his total income by virtue of subsection (1)(a) above, but

(b)with the omission from paragraph (a) of the words from “or” to the end of that paragraph.”

(8)Subsection (9) shall be renumbered as subsection (13) and after subsection (8) there shall be inserted—

“(9)If, in a case falling within subsection (1)(d) above, the trustees were resident in the United Kingdom immediately before the happening of the chargeable event in question, the amount of the gain—

(a)shall be deemed to form part of the income of the trustees for the year of assessment in which the chargeable event happened; and

(b)shall be chargeable to income tax at the rate applicable to trusts for that year.

(10)If, in a case falling within subsection (1)(d) above, the trustees were not resident in the United Kingdom immediately before the happening of the chargeable event in question, then, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of the amount of the gain, section 740 shall apply as if—

(a)the amount of the gain constituted income becoming payable to the trustees; and

(b)that income were income arising to the trustees in the year of assessment in which the chargeable event happened.

(11)In a case falling within subsection (1)(e) above, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of the amount of the gain, section 740 shall apply as if—

(a)the amount of the gain constituted income becoming payable to the foreign institution; and

(b)that income were income arising to the foreign institution in the year of assessment in which the chargeable event happened.

(12)For the purposes of this section, property held for the purposes of a foreign institution shall be regarded as in the beneficial ownership of the foreign institution.”

(9)In subsection (13) (definitions) the following definition shall be inserted at the appropriate place—

• ““foreign institution” means a person which is a company or other institution resident or domiciled outside the United Kingdom.”

(10)After that subsection there shall be inserted—

“(14)Any reference in this section to trusts created by an individual includes a reference to trusts arising under—

(a)section 11 of the [1882 c. 75.] Married Women’s Property Act 1882;

(b)section 2 of the [1880 c. 26.] Married Women’s Policies of Assurance (Scotland) Act 1880; or

(c)section 4 of the [1964 c. 23 (N.I.).] Law Reform (Husband and Wife) Act Northern Ireland) 1964;

and references to the settlor or to the person creating the trusts shall be construed accordingly.”