Income Tax (Trading and Other Income) Act 2005

Part 5U.K.Miscellaneous income

Chapter 1U.K.Introduction

574Overview of Part 5U.K.

(1)This Part imposes charges to income tax under—

(a)Chapter 2 (receipts from intellectual property),

[F1(aa)Chapter 2A (offshore receipts in respect of intangible property),]

(b)Chapter 3 (films and sound recordings: non-trade businesses),

(c)Chapter 4 (certain telecommunication rights: non-trading income),

(d)Chapter 5 (settlements: amounts treated as income of settlor),

(e)Chapter 6 (beneficiaries' income from estates in administration),

(f)Chapter 7 (annual payments not otherwise charged), and

(g)Chapter 8 (income not otherwise charged).

(2)Part 6 deals with exemptions from the charges under this Part [F2(but see section 608X)].

(3)See, in particular, any exemptions mentioned in the Chapters of this Part.

(4)The charges under this Part apply to non-UK residents as well as UK residents but this is subject to section 577(2) (charges on non-UK residents only on UK source income).

(5)This section needs to be read with the relevant priority rules (see sections 2, 575 and 576).

575Provisions which must be given priority over Part 5U.K.

(1)Any income, so far as it falls within—

(a)any Chapter of this Part, and

(b)Chapter 2 of Part 2 (receipts of a trade, profession or vocation),

is dealt with under Part 2.

(2)Any income, so far as it falls within—

(a)any Chapter of this Part, and

(b)Chapter 3 of Part 3 so far as the Chapter relates to a UK property business,

is dealt with under Part 3.

(3)Any income, so far as it falls within—

(a)any Chapter of this Part, and

(b)Chapter 2 or 3 of Part 4 (interest and dividends etc. from UK resident companies etc.),

is dealt with under the relevant Chapter of Part 4.

(4)Any income, so far as it falls within—

(a)any Chapter of this Part, and

(b)Part 2, 9 or 10 of ITEPA 2003 (employment income, pension income or social security income),

is dealt with under the relevant Part of ITEPA 2003.

576Priority between Chapters within Part 5U.K.

[F3(1)Any income, so far as it falls within Chapter 2 (receipts from intellectual property) and Chapter 2A (offshore receipts in respect of intangible property), is dealt with under Chapter 2.]

[F4(2)] Any income, so far as it falls within Chapter 2 (receipts from intellectual property) and Chapter 3 (films and sound recordings: non-trade businesses), is dealt with under Chapter 3.

577Territorial scope of Part 5 chargesU.K.

(1)Income arising to a UK resident is chargeable to tax under this Part whether or not it is from a source in the United Kingdom.

(2)Income arising to a non-UK resident is chargeable to tax under this Part only if it is from a source in the United Kingdom.

[F5(2A)If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.]

(3)References in this section to income which is from a source in the United Kingdom include, in the case of any income which does not have a source, references to income which has a comparable connection to the United Kingdom.

(4)This section is subject to any express or implied provision to the contrary in this Part (or elsewhere in the Income Tax Acts).

[F6(5)See also section 577A (territorial scope of Part 5 charges: receipts from intellectual property).]

[F7577ATerritorial scope of Part 5 charges: receipts from intellectual propertyU.K.

(1)References in section 577 to income which is from a source in the United Kingdom include income arising where—

(a)a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident, and

(b)the payment is made in connection with a trade carried on by that person through a permanent establishment in the United Kingdom.

(2)Subsection (3) applies where a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident in connection with a trade carried on by that person only in part through a permanent establishment in the United Kingdom.

(3)The payment referred to in subsection (2) is to be regarded for the purposes of subsection (1)(b) as made in connection with a trade carried on through a permanent establishment in the United Kingdom to such extent as is just and reasonable, having regard to all the circumstances.

(4)In determining for the purposes of section 577 whether income arising is from a source in the United Kingdom, no regard is to be had to arrangements the main purpose of which, or one of the main purposes of which, is to avoid the effect of the rule in subsection (1).

(5)In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “intellectual property” has the same meaning as in section 579;

• “permanent establishment”—

  (a)

  in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and

  (b)

  in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.]

Chapter 2U.K.Receipts from intellectual property

IntroductionU.K.

578Contents of ChapterU.K.

(1)This Chapter imposes charges to income tax under—

(a)section 579 (royalties and other income from intellectual property),

(b)section 583 (income from disposals of know-how), and

(c)section 587 (income from sales of patent rights).

(2)For [F8an exemption] from the charge under section 579, see, in particular, [F9section] 727 (certain annual payments by individuals) F10....

(3)This Chapter also provides for relief from income tax on patent income (see section 600).

Charge to tax on non-trading income from intellectual propertyU.K.

579Charge to tax on royalties and other income from intellectual propertyU.K.

(1)Income tax is charged on royalties and other income from intellectual property.

(2)In this section “intellectual property” means—

(a)any patent, trade mark, registered design, copyright, design right, performer's right or plant breeder's right,

(b)any rights under the law of any part of the United Kingdom which are similar to rights within paragraph (a),

(c)any rights under the law of any territory outside the United Kingdom which correspond or are similar to rights within paragraph (a), and

(d)any idea, information or technique not protected by a right within paragraph (a), (b) or (c).

580Income charged under section 579U.K.

(1)Tax is charged under section 579 on the full amount of the income arising in the tax year.

(2)Subsection (1) is subject to Part 8 (foreign income: special rules).

(3)See section 582 for provision about the calculation of the amount of income charged under section 579.

(4)This section needs to be read with section 527 of ICTA (spreading of patent royalties etc. over several years).

581Person liable for tax under section 579U.K.

The person liable for any tax charged under section 579 is the person receiving or entitled to the income.

582Deductions in calculating certain income charged under section 579U.K.

(1)This section applies for calculating the amount of income charged under section 579 other than annual payments.

(2)Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.

(3)If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.

(4)Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.

(5)Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.

(6)The relief given under section 600 (relief for expenses: patent income) is additional to the relief under this section.

(7)The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of subsection (1).

Disposals of know-howU.K.

583Charge to tax on income from disposals of know-howU.K.

(1)Income tax is charged on profits arising where consideration is received by a person—

(a)for the disposal of know-how, or

(b)for giving, or wholly or partly fulfilling, an undertaking which—

(i)is given in connection with a disposal of know-how, and

(ii)restricts or is designed to restrict any person's activities in any way.

(2)For the purposes of subsection (1)(b), it does not matter whether or not the undertaking is legally enforceable.

(3)Subsection (1) is subject to the exceptions in section 584.

(4)In this Chapter “know-how” means any industrial information or techniques likely to assist in—

(a)manufacturing or processing goods or materials,

(b)working a source of mineral deposits (including searching for, discovering or testing mineral deposits or obtaining access to them), or

(c)carrying out any agricultural, forestry or fishing operations.

(5)In subsection (4)—

(a)“mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and for this purpose geothermal energy is treated as a natural deposit, and

(b)“source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.

584Exceptions to charge under section 583U.K.

(1)Section 583 does not apply in the following cases.

(2)Case A is if the consideration is brought into account under—

(a)section 579 (charge to tax on royalties etc.), or

(b)section 462 of CAA 2001 (disposal values).

(3)Case B is if the consideration is dealt with in relation to the person receiving it as a capital receipt for goodwill under section 194(2) (disposal of know-how as part of disposal of all or part of a trade).

(4)Case C is if the disposal of the know-how is by way of a sale and—

(a)the buyer is a body of persons over which the seller has control,

(b)the seller is a body of persons over which the buyer has control, or

(c)the buyer and the seller are both bodies of persons and another person has control over both of them.

(5)In subsection (4) “body of persons” includes a firm.

(6)See also Chapter 14 of Part 2 and section 575 (disposals of know-how used in a trade dealt with by Part 2).

585Income charged under section 583U.K.

(1)Tax is charged under section 583 on the full amount of the profits arising in the tax year.

(2)The profits charged under section 583 are—

(a)the amount of the consideration, less

(b)any expenditure incurred by the recipient wholly and exclusively in the acquisition or disposal of the know-how.

(3)Such expenditure may not be taken into account more than once, whether under this section or otherwise.

(4)This section needs to be read with section 603 (contributions to expenditure).

586Person liable for tax under section 583U.K.

The person liable for any tax charged under section 583 is the person receiving the consideration.

Sales of patent rightsU.K.

587Charge to tax on income from sales of patent rightsU.K.

(1)Income tax is charged on profits from sales of the whole or part of any patent rights.

(2)The tax is charged if—

(a)the seller is a UK resident, or

(b)the seller is a non-UK resident and the patent is granted under the laws of the United Kingdom.

(3)Where the seller is a non-UK resident company, tax is not charged if the seller is chargeable to corporation tax in respect of the proceeds of the sale.

(4)In this Chapter “patent rights” means the right to do or authorise the doing of anything which, but for the right, would be an infringement of a patent.

588Income charged under section 587U.K.

(1)A seller's profits from the sale of the whole or part of patent rights are—

(a)any capital sum comprised in the proceeds of the sale, less

(b)the deductible costs.

(2)The deductible costs are—

(a)the capital cost (if any) of the rights sold, and

(b)any incidental expenses incurred by the seller in connection with the sale.

(3)If—

(a)the seller acquired the rights sold, or the rights out of which they were granted, by purchase,

(b)the seller has previously sold part of the purchased rights, and

(c)the proceeds of that sale, after deducting any incidental expenses, consisted wholly or partly of a capital sum,

the capital cost is reduced by that capital sum.

(4)References in this Chapter to the capital cost of patent rights are to any capital sum included in any price paid by the seller to purchase—

(a)the rights, or

(b)the rights out of which they were granted.

(5)This section needs to be read with sections 600 (relief for expenses: patent income) and 603 (contributions to expenditure).

589Person liable for tax under section 587U.K.

The person liable for any tax charged under section 587 is the seller of the patent rights.

590UK resident sellers: spreading rulesU.K.

(1)This section applies if the person liable under section 587 is a UK resident.

(2)If the person does not receive the proceeds of sale in instalments, one-sixth of the amount chargeable is taxed in the tax year in which the person receives the proceeds of the sale and in each of the next 5 tax years.

(3)The person may elect to be taxed instead on the whole of the amount chargeable under section 587 in the tax year in which the person receives the proceeds of sale.

(4)If the person receives the proceeds of sale in instalments, one-sixth of the amount chargeable in respect of each instalment is taxed in the tax year in which the person receives the instalment and in each of the next 5 tax years.

(5)The person may elect to be taxed instead on the whole of any instalment in the tax year in which the person receives it.

(6)An election under subsection (3) or (5) must be made on or before the first anniversary of the normal self-assessment filing date for that tax year.

591Non-UK resident sellers: election for spreadingU.K.

(1)If the person liable under section 587—

(a)is a non-UK resident, and

(b)does not receive the proceeds of sale in instalments,

the whole amount chargeable is taxed in the tax year in which the person receives the proceeds.

(2)The person may elect to be taxed instead on one-sixth of the amount chargeable in the tax year in which the person receives the proceeds of sale and in each of the next 5 tax years.

(3)An election under subsection (2) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the proceeds of sale are received.

(4)Such repayments and assessments are to be made for each of the tax years affected as are necessary to give effect to the election.

(5)Subsection (4) is subject to the qualifications in section 596 (adjustments where tax has been deducted).

592Further provision about elections for spreading: instalmentsU.K.

(1)If the person liable under section 587—

(a)is a non-UK resident, and

(b)receives the proceeds of sale in instalments,

the amount chargeable in respect of each instalment is taxed in the tax year in which the person receives the instalment.

(2)The person may, for any instalment, elect to be taxed instead on one-sixth of the amount chargeable in respect of the instalment in the tax year in which the person receives it and in each of the next 5 tax years.

(3)An election under subsection (2) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the instalment is received.

(4)Such repayments and assessments are to be made for each of the tax years affected as are necessary to give effect to the election.

(5)Subsection (4) is subject to the qualifications in section 596 (adjustments where tax has been deducted).

593Death of sellerU.K.

(1)If a seller who is liable to income tax under section 587 dies, any amounts which would have been chargeable in later tax years under—

(a)section 590(2) or (4) (UK resident sellers: spreading rules), or

(b)section 591(2) or 592(2) (non-UK resident sellers: elections for spreading),

are taxed in the tax year in which the seller dies.

(2)The personal representatives may elect that the tax payable by reason of subsection (1) be reduced to the total amount of income tax that the seller and the estate would have been liable to pay if the amounts chargeable by reason of that subsection had been taxed in equal parts in each of the lifetime tax years.

(3)In subsection (2) “the lifetime tax years” means—

(a)the tax year in which the seller received the proceeds or, as the case may be, the instalment, and

(b)each of the next tax years up to and including that in which the seller died.

(4)An election under subsection (2) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the death occurs.

594Winding up of a body corporateU.K.

(1)If a body corporate which is liable to income tax under section 587 commences to be wound up, any amounts falling within subsection (2) are taxed in the year in which the winding up commences.

(2)The amounts are—

(a)any amounts which would have been chargeable in later tax years under section 591(2) or 592(2), and

(b)any amounts (arising to the body in a fiduciary or representative capacity) which would have been chargeable in later tax years under section 590(2) or (4).

595Deduction of tax from payments to non-UK residentsU.K.

(1)This section applies if a person who is a non-UK resident is liable to tax under section 587 on profits from the sale of the whole or part of any patent rights.

(2)The rules in section 588 allowing the capital cost (if any) of the rights sold to be deducted in calculating the profits from the sale do not affect the amount of income tax which [F11is to be deducted under section 910 of ITA 2007]

(3)No election made by the seller under section 591(2) or 592(2) (election for spreading) in relation to the proceeds of sale or any instalment affects the amount of income tax which [F12is to be deducted under section 910 of ITA 2007]

(a)deducted from the proceeds of sale or instalment under section 349(1) of ICTA, and

(b)assessed under section 350 of that Act.

596Adjustments where tax has been deductedU.K.

(1)Where any sum has been deducted from a payment by virtue of section 595(2), any adjustment necessary—

(a)because of section 595(2), or

(b)because of an election under section 591(2) or 592(2),

must be made by way of repayment of tax.

(2)Adjustments necessary to give effect to an election under section 591(2) or 592(2) must be made year by year, treating one-sixth of the sum deducted from the proceeds of sale or instalment as income tax paid for each of the 6 years.

(3)No repayment is to be made of any tax treated under subsection (2) as income tax paid for a particular year unless and until it is ascertained that the income tax ultimately falling to be paid for that year is less than the amount which was paid for that year.

597Licences connected with patentsU.K.

(1)The acquisition of a licence in respect of a patent is treated for the purposes of sections 587 to 596 as a purchase of patent rights.

(2)The grant of a licence in respect of a patent is treated for the purposes of sections 587 to 596 as a sale of part of patent rights.

(3)But the grant by a person entitled to patent rights of an exclusive licence is treated for the purposes of sections 587 to 596 as a sale of the whole of those rights.

(4)In subsection (3) “exclusive licence” means a licence to exercise the rights to the exclusion of the grantor and all other persons for the period remaining until the rights come to an end.

598Rights to acquire future patent rightsU.K.

(1)If a sum is paid to obtain a right to acquire future patent rights, then for the purposes of sections 587 to 596—

(a)the payer is treated as purchasing patent rights for that sum, and

(b)the recipient is treated as selling patent rights for that sum.

(2)If a person—

(a)pays a sum to obtain a right to acquire future patent rights, and

(b)subsequently acquires those rights,

the expenditure is to be treated for the purposes of sections 587 to 596 as having been expenditure on the purchase of those rights.

(3)In this section “a right to acquire future patent rights” means a right to acquire in the future patent rights relating to an invention in respect of which the patent has not yet been granted.

599Sums paid for Crown use etc. treated as paid under licenceU.K.

(1)This section applies if an invention which is the subject of a patent is used by or for the service of—

(a)the Crown under sections 55 to 59 of the Patents Act 1977 (c. 37), or

(b)the government of a country outside the United Kingdom under corresponding provisions of the law of that country.

(2)The use is treated for the purposes of sections 587 to 596 as having taken place under a licence.

(3)Sums paid in respect of the use are treated for the purposes of sections 587 to 596 as having been paid under a licence.

Relief from income tax on patent incomeU.K.

600Relief for expenses: patent incomeU.K.

(1)Relief may be claimed under this section for—

(a)inventor's expenses, and

(b)patent application and maintenance expenses.

(2)In this section “inventor's expenses” means expenses which—

(a)have been incurred by an individual who, alone or jointly, devised an invention for which a patent has been granted, and

(b)are attributable to devising it.

(3)In this section “patent application and maintenance expenses” means expenses incurred by a person in connection with—

(a)the grant or maintenance of a patent,

(b)the extension of the term of a patent, or

(c)a rejected or abandoned application for a patent,

but not incurred for the purposes of any trade carried on by the person.

(4)Relief may not be claimed under this section for patent application and maintenance expenses unless they are expenses which would, if incurred for the purposes of a trade, have been allowable as a deduction in calculating the profits of the trade.

(5)Relief may not be claimed under this section for any expenses if relief for them is given under—

(a)section 582 (calculation of income for the purposes of the charge to tax on royalties etc.), or

(b)any other provision of the Tax Acts.

(6)This section needs to be read with section 603 (contributions to expenditure).

601How relief is given under section 600U.K.

(1)This section sets out how relief for expenses is given where a person makes a claim under section 600.

(2)The amount of the expenses must be deducted from or set off against the person's income from patents for the tax year in which the expenses were incurred.

[F13(2A)The deduction or set-off is given effect at Step 2 of the calculation in section 23 of ITA 2007.]

(3)If the amount to be allowed is greater than the amount of the person's income from patents for that tax year, the excess must be deducted from or set off against the person's income from patents for the next tax year, and so on for subsequent tax years, without the need for a further claim.

(4)In this section “income from patents” means—

(a)royalties or other sums paid in respect of the use of a patent (whether chargeable under this Chapter or otherwise),

(b)amounts on which tax is payable under section 587, 593 or 594, and

(c)amounts on which tax is payable under—

(i)section 472(5) of CAA 2001 (patent allowances: balancing charges), or

(ii)paragraph 100 of Schedule 3 to that Act (balancing charges in respect of pre-1st April 1986 expenditure on the purchase of patent rights).

(5)In this section references to a person's income from patents are to the income after any allowance has been deducted from or set off against it under section 479 of CAA 2001 (certain allowances against income from patents).

Payments received after deduction of taxU.K.

602Payments received after deduction of taxU.K.

[F14In accordance with section 848 of ITA 2007, a sum representing income tax deducted under either of the following Chapters] from a payment of royalties or other income within this Chapter is treated as income tax paid by the recipient [F15—

• Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and patent royalties), and

• Chapter 7 of that Part (deduction from other payments connected with intellectual property).]

SupplementaryU.K.

603Contributions to expenditureU.K.

(1)For the purposes of sections 585, 588 and 600, the general rule is that a person (“A”) is to be regarded as not having incurred expenditure so far as it has been, or is to be, met (directly or indirectly) by—

(a)a public body, or

(b)a person other than A.

(2)In this Chapter “public body” means the Crown or any government, local authority or other public authority (whether in the United Kingdom or elsewhere).

(3)The general rule does not apply to the expenses mentioned in section 588(2)(b) (incidental expenses incurred by a seller of patent rights).

(4)The general rule is subject to the exception in section 604.

604Contributions not made by public bodies nor eligible for tax reliefU.K.

(1)A person (“A”) is to be regarded as having incurred expenditure (despite section 603(1)) so far as the requirements in subsections (2) and (3) are met in relation to the expenditure.

(2)The first requirement is that the person meeting A's expenditure (“B”) is not a public body.

(3)The second requirement is that—

(a)no allowance can be made under Chapter 2 of Part 11 of CAA 2001 (contribution allowances) in respect of B's expenditure, and

(b)the expenditure is not allowed to be deducted in calculating the profits of a trade, profession or vocation carried on by B.

(4)When determining for the purposes of subsection (3)(a) whether such an allowance can be made, assume that B is within the charge to tax.

605ExchangesU.K.

(1)In this Chapter references to the sale of property include the exchange of property.

(2)In this section—

• references to property include know-how, and

• references to the sale of property include the disposal of know-how.

(3)For the purposes of subsection (1), any provision of this Chapter referring to a sale has effect with the necessary modifications, including, in particular, those in subsections (4) and (5).

(4)References to the proceeds of sale and to the price include the consideration for the exchange.

(5)References to capital sums included in the proceeds of sale include references to so much of the consideration for the exchange as would have been a capital sum if it had been a money payment.

606Apportionment where property sold togetherU.K.

(1)Any reference in this Chapter to the sale of property includes the sale of that property together with other property.

(2)In this section—

• references to property include know-how, and

• references to the sale of property include the disposal of know-how.

(3)For the purposes of subsection (1), all property sold as a result of one bargain is to be treated as sold together even though—

(a)separate prices are, or purport to be, agreed for separate items of that property, or

(b)there are, or purport to be, separate sales of separate items of that property.

(4)If an item of property is sold together with other property, then, for the purposes of the charges under sections 583 and 587—

(a)the net proceeds of the sale of that item are treated as being so much of the net proceeds of the sale of all the property as, on a just and reasonable apportionment, is attributable to that item, and

(b)the expenditure incurred on the provision or purchase of that item is treated as being so much of the consideration given for all the property as, on a just and reasonable apportionment, is attributable to that item.

607Questions about apportionments affecting two or more personsU.K.

(1)Any question about the way in which a sum is to be apportioned under section 606 must be determined in accordance with section 563(2) to (6) of CAA 2001 (procedure for determining certain questions affecting two or more persons) if it materially affects two or more taxpayers.

(2)For the purposes of subsection (1) a question materially affects two or more taxpayers if at the time when the question falls to be determined it appears that the determination is material to the liability to tax (for whatever period) of two or more persons.

608Meaning of “capital sums” etc.U.K.

Section 4 of CAA 2001 (meaning of “capital sums” etc.) applies in relation to this Chapter as it applies in relation to that Act.

[F16CHAPTER 2AU.K.Offshore receipts in respect of intangible property

Charge to tax on offshore receipts in respect of intangible propertyU.K.

608ACharge to tax on UK-derived amountsU.K.

(1)This section applies if—

(a)at any time in a tax year, a person is not UK resident and is not resident in a full treaty territory, and

(b)UK-derived amounts arise to the person in the tax year.

(2)Income tax is charged on the UK-derived amounts.

(3)See—

• sections 608D to 608H for the meaning of expressions used in this section;

• sections 608J to 608N for exemptions from the charge under this section.

(4)References in the Tax Acts to income from a source in the United Kingdom include UK-derived amounts.

608BIncome charged under section 608AU.K.

Tax is charged under section 608A on the full amount of the UK-derived amounts arising in the tax year.

608CPerson liable for tax under section 608AU.K.

The person liable for any tax charged under section 608A is the person receiving or entitled to the UK-derived amounts.

608DMeaning of residenceU.K.

(1)This section applies for the purposes of this Chapter.

(2)A person is “resident” in a territory if, under the laws of the territory, the person is liable to tax there—

(a)by reason of the person's domicile, residence or place of management, but

(b)not in respect only of

[F17(i)]income from sources in that territory or capital situated there [F18, or]

[F19(ii)such income and capital, and amounts remitted to or otherwise received in the territory.]

(3)Where—

(a)a person is resident in a territory outside the United Kingdom generally for the purposes of the laws of the territory or for particular purposes under those laws, and

(b)the laws of the territory have no provision for a person to be resident there for tax purposes,

the person is “resident” in the territory.

[F20(4)Despite subsections (2) and (3), a person is treated as not resident in a full treaty territory if—

(a)the double taxation arrangements made in relation to the territory contain provision expressly excluding persons of a particular description from relief under the arrangements, and

(b)the person is of that description.

(5)In subsection (4) the reference to provision of the kind mentioned there does not include provision corresponding to the provision made by paragraphs 1 to 7 of article 29 of the OECD Model Tax Convention on Income and on Capital (entitlement to benefits), published on 21 November 2017.]

608EMeaning of “full treaty territory”U.K.

(1)For the purposes of this Chapter a territory is a “full treaty territory” if—

(a)double taxation arrangements have been made in relation to the territory, and

(b)the arrangements contain a non-discrimination provision.

(2)In subsection (1) “non-discrimination provision”, in relation to double taxation arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in the other contracting state to—

(a)any taxation, or

(b)any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other contracting state in the same circumstances (in particular with respect to residence) are or may be subjected.

(3)In subsection (2) “national”, in relation to a contracting state, includes—

(a)an individual possessing the nationality or citizenship of the contracting state, and

(b)a legal person, partnership or association deriving its status as such from the laws in force in that contracting state.

608FMeaning of “UK-derived amount” and “UK sales”U.K.

(1)For the purposes of this Chapter an amount is a “UK-derived amount” if—

(a)it is an amount (whether of a revenue or capital nature) in respect of the enjoyment or exercise of rights that constitute any intangible property, and

(b)the enjoyment or exercise of those rights (or of any rights derived, directly or indirectly, from those rights) enables, facilitates or promotes UK sales (directly or indirectly).

(2)It does not matter whether the amount relates to UK sales in the tax year mentioned in section 608A or any other tax year.

(3)In this Chapter “UK sales” means any services, goods or other property—

(a)provided in the United Kingdom, or

(b)provided to persons in the United Kingdom.

[F21(4)In subsection (3) the reference to anything being provided does not include it being provided for resale.

(5)For the purposes of subsection (4) a thing is provided “for resale” where it is provided to a person who obtains it for the purpose of providing it to another person in the following circumstances—

(a)there is no change in the thing itself, and

(b)if what is provided differs in any way from what was obtained, the difference is merely incidental to the provision of the thing.

(6)For the purposes of this Chapter a service consisting of the provision of online advertising constitutes a UK sale so far as the advertising is targeted at persons in the United Kingdom.]

608GSection 608F: apportionment of amountsU.K.

(1)This section applies where—

(a)a person receives or is entitled to an amount in respect of the enjoyment or exercise of rights that constitute any intangible property, and that enjoyment or exercise enables, facilitates or promotes UK sales and other sales, or

(b)a person receives or is entitled to an amount in respect of—

(i)the enjoyment or exercise of rights that constitute any intangible property, where that enjoyment or exercise enables, facilitates or promotes UK sales, and

(ii)anything else.

(2)The amount is to be regarded for the purposes of this Chapter as constituting a UK-derived amount to such extent as is just and reasonable.

(3)In a case within subsection (1)(a) it is to be presumed, unless the contrary is shown, that the proportion of the amount that is just and reasonable is—

[F22608GA.Section 608F: disregard for third party sales where intangible property makes insignificant contributionU.K.

(1)This section applies where—

(a)a person (A) receives or is entitled to a UK-derived amount,

(b)the services, goods or other property in question are not provided in the United Kingdom, or to persons there, by A or a person connected with A, and

(c)the UK sales in question are enabled, facilitated or promoted to an insignificant extent by the enjoyment or exercise of the rights in question.

(2)For the purposes of this Chapter no account is to be taken of A’s receipt of, or entitlement to, the UK-derived amount.

(3)For the purposes of subsection (1)(b), anything provided by a reseller (including anything treated as so provided by virtue of this subsection) is to be treated as provided by the person who provided it to the reseller.

(4)For this purpose “reseller” means a person to whom a thing is provided for resale (within the meaning of section 608F(5)).]

608HMeaning of “intangible property”U.K.

(1)In this Chapter “intangible property” means any property except—

(a)tangible property,

(b)an estate, interest or right in or over land,

(c)a right in respect of anything within paragraph (a) or (b),

(d)a financial asset,

(e)a share or other right in relation to the profits, governance or winding up of a company, or

(f)any property of a prescribed description.

(2)In this section—

• “financial asset” has the meaning given by section 806 of CTA 2009;

• “prescribed” means prescribed by regulations made by the Treasury.

F23608IApplication of Chapter to certain partnershipsU.K.

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

ExemptionsU.K.

608JExemption where limited UK salesU.K.

(1)Section 608A does not apply in relation to a person for a tax year if the total value of the person's UK sales in that tax year does not exceed £10,000,000.

(2)Where—

(a)a person (A), or a person connected with A, receives or is entitled to an amount (whether of a revenue or capital nature), and

(b)the amount relates (wholly or in part, and directly or indirectly) to the provision of services, goods or other property constituting UK sales,

the UK sales are regarded for the purposes of subsection (1) as A's UK sales.

[F24608JA.Exemption where company resident in specified territoryU.K.

(1)Section 608A does not apply in relation to a company for a tax year if—

(a)the company is resident in a specified territory throughout the tax year,

(b)UK-derived amounts arising to the company in the tax year are chargeable to tax under the laws of the territory,

(c)where those amounts are chargeable only if remitted or otherwise received in the territory, the amounts are remitted or otherwise received there in the tax year,

(d)the amount of tax which is paid in the territory in respect of the UK-derived amounts is not determined under designer tax provisions, and

(e)the company is not, at any time in the tax year, involved in an arrangement the main purpose, or one of the main purposes, of which is to obtain a tax advantage for itself or any other person.

(2)For the purposes of this section—

(a)section 608D (meaning of residence) applies as if subsections (2)(b), (4) and (5) were omitted;

(b)“specified territory” means a territory specified in regulations made by the Commissioners.

(3)Regulations under this section may have effect from a date before the day on which they are made, except insofar as they result in a territory ceasing to be specified.]

608KExemption where business undertaken within territory of residenceU.K.

(1)Section 608A does not apply in relation to a person (“the relevant person”) for a tax year if—

(a)the relevant person is resident in a territory throughout the tax year,

(b)all (or substantially all) relevant activity in relation to relevant intangible property is, and has at all times been, undertaken in that territory,

(c)there is no relevant connection between relevant intangible property and a related person, and

(d)the person makes a claim under this section.

[F25(1A)For the purposes of this section, section 608D (meaning of residence) applies as if subsections (2)(b), (4) and (5) were omitted.]

(2)For the purposes of this section intangible property is “relevant” if any UK-derived amount arising to the person in the tax year relates to it.

(3)In subsection (1)(b) “relevant activity”, in relation to relevant intangible property, means anything done (by any person)—

(a)for the purpose of creating, developing or maintaining any of the relevant intangible property; or

(b)for the purpose of generating, for the relevant person, amounts (whether of a revenue or capital nature) that relate, wholly or in part and directly or indirectly, to the enjoyment or exercise of rights that constitute any of the relevant intangible property.

(4)For the purposes of subsection (1)(c) there is a “relevant connection” between relevant intangible property and a related person if any relevant intangible property—

(a)has been transferred (directly or indirectly) from a person related to the relevant person,

(b)derives (directly or indirectly) from anything so transferred, or

(c)derives (directly or indirectly) from intangible property held by a person related to the relevant person.

(5)See section 608T for the meaning of two persons being “related”.

608LExemption where foreign tax at least half of UK taxU.K.

(1)Section 608A does not apply in relation to a person for a tax year if—

(a)the person is resident in a territory outside the United Kingdom in that year,

(b)the amount of tax (“the local tax amount”) which is paid in the territory in respect of UK-derived amounts arising in the tax year is at least half of the corresponding UK tax, and

(c)the local tax amount is not determined under designer tax provisions.

(2)See section 608M for provisions about the local tax amount.

(3)“The corresponding UK tax” means the amount of income tax that would be charged under this Chapter in respect of UK-derived amounts arising in the tax year, calculated on the following basis—

(a)section 608A applies in relation to the UK-derived amounts, and

(b)the person is not entitled to any relief or allowance for the tax year.

F26(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F27(5)For the purposes of this section, section 608D (meaning of residence) applies as if subsections (2)(b), (4) and (5) were omitted.]

608MSection 608L: the local tax amountU.K.

(1)This section applies for the purposes of section 608L.

(2)Where an amount of tax is paid in the territory in respect of—

(a)UK-derived amounts arising in the tax year, and

(b)other amounts,

the amount of tax is to be apportioned between the amounts mentioned in paragraph (a) and paragraph (b) on a just and reasonable basis.

(3)Where—

(a)in the territory any tax falls to be paid in respect of UK-derived amounts arising in the tax year,

(b)under the laws of the territory, a repayment of tax, or a payment in respect of credit for tax, is made to any person, and

(c)that repayment or payment is directly or indirectly in respect of the whole or part of the tax mentioned in paragraph (a),

the local tax amount is to be reduced by the amount of that repayment or payment (but this is subject to subsections (4) and (5)).

(4)Subsection (5) applies if the repayment or payment mentioned in subsection (3)(b) is in respect of—

(a)the tax mentioned in subsection (3)(a), and

(b)other tax.

(5)The amount of the repayment or payment is to be apportioned between the tax mentioned in subsection (3)(a) and the other tax on a just and reasonable basis, and the reduction under subsection (3) is limited to the amount apportioned to the tax mentioned in subsection (3)(a).

(6)Any reduction under subsection (3) is to be undertaken after any apportionment under subsection (2).

[F28608MA.Exemption where income of opaque partnership taxable in full treaty territoryU.K.

(1)This section applies where—

(a)under the laws of a full treaty territory, a partnership is regarded for tax purposes as an entity separate and distinct from the partners,

(b)the partnership is resident in the territory throughout a tax year,

(c)UK-derived amounts arise to the partnership in the tax year, and

(d)the UK-derived amounts are chargeable to tax under the laws of the territory.

(2)In the application of section 608A to a partner for the tax year, no account is to be taken of the UK-derived amounts.

(3)For the purposes of subsection (1)(b), the partnership is “resident” in a territory if (and only if) it is resident there by virtue of section 608D(2) (references there to be a person being read as references to the partnership).]

[F29608MB.Exemption for certain bodies corporate that are transparent in full treaty territoryU.K.

(1)This section applies where—

(a)a body corporate formed under the laws of a full treaty territory (“the relevant territory”) is not regarded under those laws, for tax purposes, as an entity separate and distinct from its members,

(b)the body is not resident, at any time in a tax year, in a territory that is not a full treaty territory,

(c)UK-derived amounts arise to the body in the tax year, and

(d)each relevant member is resident in the relevant territory throughout the tax year.

(2)In the application of section 608A to the body for the tax year, no account is to be taken of the UK-derived amounts.

(3)The relevant members are to be determined as follows—

(a)each member of the body is a relevant member (subject to paragraph (b));

(b)if a body corporate that meets the conditions in subsection (4) would otherwise be a relevant member, that body’s members are relevant members (and that body is not a relevant member);

(c)paragraph (b) applies in relation to a body that would otherwise be a relevant member by virtue of that paragraph (as well as in relation to a body that would otherwise be a relevant member by virtue of paragraph (a)).

(4)The conditions referred to in subsection (3)(b) are—

(a)that the body is formed under the laws of the relevant territory;

(b)that under those laws, the body is not regarded for tax purposes as an entity separate and distinct from its members;

(c)that the body is not resident, at any time in the tax year, in a territory that is not a full treaty territory.]

[F30608MC.Exemption for double taxation on amounts within same control groupU.K.

(1)This section applies where—

(a)two persons (A and B) are in the same control group throughout a tax year,

(b)neither A nor B is, at any time in the tax year, involved in an arrangement the main purpose, or one of the main purposes, of which is to obtain a tax advantage for A, B or any other person,

(c)income tax is charged under section 608A on a UK-derived amount arising to A in the tax year, and A is not entitled to any relief in respect of the UK-derived amount,

(d)the UK-derived amount is a direct or indirect payment from B to A in respect of rights (“relevant rights”) that—

(i)constitute any of B’s intangible property, and

(ii)derive, directly or indirectly, from rights that constitute any of A’s intangible property.

(2)In the application of section 608A to B for the tax year, the amount of any UK-derived amount arising to B in the tax year in respect of B’s relevant rights is to be reduced (but not below nil) by the amount of the UK-derived amount mentioned in subsection (1)(c).

(3)For the purposes of this section where a UK-derived amount is in respect of relevant rights and anything else, the amount is to be regarded as being in respect of relevant rights to such extent as is just and reasonable.

(4)For the meaning of “control group” see section 608S.]

608NExemptions: further provisionU.K.

(1)The Treasury may by regulations—

(a)amend this Chapter for the purpose of creating additional exemptions;

(b)amend any exemption for the time being in force.

(2)“Exemption” means a total or partial exemption from the charge under this Chapter.

(3)The regulations may confer a power to make subordinate legislation or confer a discretion on any person.

(4)The regulations may make retrospective provision, except insofar as they impose or increase taxation.

(5)A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

Recovery of tax from person in same control groupU.K.

608ONotice requiring payment from person in same control group as taxpayerU.K.

(1)This section applies where—

(a)an amount of income tax has been assessed on a person (“the taxpayer”) for a tax year by virtue of this Chapter, and

(b)the whole or any part of that amount, or of any interest on that amount, is unpaid at the end of the period of 6 months after the relevant date.

(2)A designated officer may give a notice to a relevant person requiring that person, within 30 days of the giving of the notice, to pay any unpaid tax and interest.

(3)The notice must state—

(a)the amount of income tax and interest that remains unpaid,

(b)the date when the income tax first became payable, and

(c)the relevant person's right of appeal.

(4)A notice under this section may not be given more than 3 years and 6 months after the relevant date.

(5)In this section “relevant person” means any person who was in the same control group as the taxpayer at any time in the tax year (see section 608S for the meaning of being in the same “control group”).

(6)In this section “the relevant date” means—

(a)in relation to an amount of income tax determined under section 28C of TMA 1970, the date on which the determination was issued;

(b)in relation to an amount of income tax under a self-assessment in a case where the taxpayer's return under section 8 or 8A of TMA 1970 was delivered after the last day for delivering it in accordance with that section, the date on which the return was delivered;

(c)in any other case, the date the amount mentioned in subsection (1)(a) became due and payable.

(7)A notice may be given anywhere in the world, to any relevant person (whether or not UK resident).

(8)In this section—

• “assessment”: any reference to an amount of income tax that has been assessed on a person includes an amount of income tax that has been determined under section 28C of TMA 1970 in relation to the person;

• “designated officer” means an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of this Chapter.

608PPayment notice: effectU.K.

(1)This section applies where a notice under section 608O is given to a person.

(2)For the purposes of the recovery from the person of any unpaid tax and interest (including interest accruing after the date of the notice), the person is treated as if—

(a)the amount of income tax assessed as mentioned in section 608O(1)(a) had been assessed on the person,

(b)that amount became due and payable when the tax mentioned in section 608O(1)(a) became due and payable, and

(c)any payments made in respect of the amount mentioned in section 608O(1)(a) (or in respect of interest on that amount) had been made in respect of the amount treated as assessed by virtue of paragraph (a) of this subsection (or in respect of interest on that amount).

(3)Nothing in subsection (2) gives the person a right to appeal against the assessment mentioned in section 608O(1)(a) (or against any assessment treated as made by virtue of subsection (2) of this section).

(4)Any appeal by the taxpayer against the assessment mentioned in section 608O(1)(a) does not affect the liabilities arising by virtue of the giving of the notice.

608QPayment notice: appealsU.K.

(1)This section applies where a notice under section 608O is given to a person.

(2)The person may appeal against the notice, within the period of 30 days beginning with the date on which it is given, on the ground that the person is not a relevant person (as defined by section 608O).

(3)Where an appeal is made, anything required by the notice to be paid is due and payable as if there had been no appeal.

(4)Section 56 of TMA 1970 (payment of tax where further appeal) applies in relation to any further appeal against the notice, but the relevant court or tribunal may, on the application of Her Majesty's Revenue and Customs, direct that section 56(2) does not apply to anything required by the notice to be paid.

(5)A direction may be given if the relevant court or tribunal considers it necessary for the protection of the revenue.

(6)In this section “relevant court or tribunal” has the same meaning as in section 56 of TMA 1970.

608RPayment notice: effect of making payment etcU.K.

(1)This section applies where a notice under section 608O is given to a person.

(2)A person who pays an amount in pursuance of the notice may recover that amount from the taxpayer.

(3)In calculating the person's income, profits or losses for any tax purposes—

(a)a payment in pursuance of the notice is not allowed as a deduction, and

(b)the reimbursement of any such payment is not regarded as a receipt.

(4)Any amount paid by the person in pursuance of the notice is to be taken into account in calculating—

(a)the amount unpaid, and

(b)the amount due by virtue of any other notice under section 608O relating to the amount unpaid.

(5)Similarly, any payment by the taxpayer of any of the amount unpaid is to be taken into account in calculating the amount due by virtue of the notice (or by virtue of any other notice under section 608O relating to the amount unpaid).

Meaning of “control group” and “related person”U.K.

608SControl groupsU.K.

(1)Two persons are in the same control group at any time if—

(a)they are consolidated for accounting purposes for a period which includes that time,

(b)one of them has a 51% investment in the other at that time, or

(c)a third person has a 51% investment in each of them at that time.

(2)Two persons are consolidated for accounting purposes for a period if—

(a)their financial results for the period are required to be comprised in group accounts,

(b)their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or

(c)their financial results for the period are in fact comprised in group accounts.

(3)In this section “group accounts” means accounts prepared under—

(a)section 399 of the Companies Act 2006, or

(b)any corresponding provision of the law of a territory outside the United Kingdom.

(4)For the meaning of having a 51% investment, see section 608U.

608TRelated personsU.K.

(1)Two persons are “related” at any time if—

(a)at that time—

(i)they are in the same control group,

(ii)one of them has a 25% investment in the other, or

(iii)a third person has a 25% investment in both of them, or

(b)at any time in the period of 6 months beginning or ending at that time—

(i)one of them directly or indirectly participates in the management, control or capital of the other, or

(ii)a third person directly or indirectly participates in the management, control or capital of both of them.

(2)See—

• section 608S for the meaning of being in the same “control group”;

• section 608U for the meaning of having a 25% investment;

• section 608V for the meaning of direct or indirect participation in the management, control or capital of a person.

608UMeaning of “51% investment” and “25% investment”U.K.

(1)A person (P) has a 51% investment in another person (C) if any of the following apply—

(a)P possesses or is entitled to acquire more than half of the voting power in C;

(b)in the event of a disposal of the whole of the equity in C, P would receive more than half of the proceeds;

(c)in the event that the income in respect of the equity in C were distributed among the equity holders in C, P would receive more than half of the amount so distributed;

(d)in the event of a winding-up of C or in any other circumstances, P would receive more than half of C's assets which would then be available for distribution among the equity holders in C in respect of the equity in C.

(2)A person (P) has a 25% investment in another person (C) where any paragraph of subsection (1) would apply if in that paragraph for “more than half” there were substituted “ at least a quarter ”.

(3)Section 464(2) to (11) and section 465 of TIOPA 2010 apply for the purposes of subsections (1) and (2) of this section.

(4)In the application of section 464(10) of TIOPA for the purposes of subsection (1), the reference to a “25% investment” is to be read as a “51% investment”.

608VMeaning of direct or indirect participation in management, control or capitalU.K.

(1)This section applies for the purposes of section 608T.

(2)A person is directly participating in the management, control or capital of another person at a particular time only if section 157 of TIOPA 2010 so provides.

(3)A person is indirectly participating in the management, control or capital of another person at a particular time only if section 159 or 160 of TIOPA 2010 so provides.

GeneralU.K.

608WAnti-avoidanceU.K.

(1)This section applies if a person has entered into any arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for the person as a result (wholly or partly) of—

(a)anything not being subject to the charge under section 608A, or

(b)any provisions of double taxation arrangements having effect in a case where the advantage is contrary to the object and purpose of the provisions.

(2)The tax advantage is to be counteracted by the making of such adjustments as are just and reasonable.

(3)The adjustments may be made (whether by an officer of Revenue and Customs or the person) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(4)Where this section applies by virtue of subsection (1)(b), the counteraction has effect despite section 6(1) of TIOPA 2010.

(5)In this [F31Chapter] “tax advantage” includes—

(a)relief or increased relief from tax,

(b)repayment or increased repayment of tax,

(c)avoidance or reduction of a charge to tax or an assessment to tax,

(d)avoidance of a possible assessment to tax,

(e)deferral of a payment of tax or advancement of a repayment of tax, and

(f)avoidance of an obligation to deduct or account for tax.

608XInteraction with other general provisionsU.K.

(1)This section applies where section 608A applies in relation to a person for a tax year (or would apply, if the following provisions of this section applied).

(2)Part 6 (exempt income) does not apply in relation to UK-derived amounts arising to the person in the tax year.

(3)For the purposes of calculating the person's liability to income tax for the tax year—

(a)Chapter 1 of Part 14 of ITA 2007 (limits on liability to income tax of non-residents) does not apply in relation to UK-derived amounts arising to the person in the tax year;

(b)accordingly, the person's liability is the sum of—

(i)the person's liability as regards UK-derived amounts (with that Chapter not applying), and

(ii)the person's liability as regards anything else (with that Chapter applying, to the extent it would otherwise apply).

608YAppeals against assessmentsU.K.

(1)This section applies where a person (“the taxpayer”) makes an appeal in relation to an amount of income tax charged on the taxpayer under section 608A.

(2)Section 55(3) to (8A) of TMA 1970 (application for postponement of payment of tax pending appeal) do not apply in relation to the tax charged (and no agreement as to the postponement of payment of any of that tax, or of interest on it, may be made).

(3)In the case of a further appeal, the relevant court or tribunal (as defined by section 56 of TMA 1970) may, on the application of Her Majesty's Revenue and Customs, direct that section 56(2) of TMA 1970 does not apply to the tax charged.

(4)A direction may be given if the relevant court or tribunal considers it necessary for the protection of the revenue.

(5)Nothing in this section applies in relation to a liability arising as a result of the giving of a notice under section 608O.

Interpretation: generalU.K.

608ZInterpretation of Chapter: generalU.K.

In this Chapter—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;

• “control group” has the meaning given by section 608S;

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

• [F32“designer tax provisions” means provisions which appear to the Commissioners to be designed to enable persons to exercise significant control over the amount of tax which they pay in respect of UK-derived amounts;]

• “full treaty territory” has the meaning given by section 608E;

• “intangible property” has the meaning given by section 608H;

• “related”: references to two persons being related are to be read in accordance with section 608T;

• “resident”: references to being resident in a territory are to be read in accordance with section 608D;

• [F33“tax”: any reference (however expressed) to tax payable or paid under the laws of a territory outside the United Kingdom is a reference to a tax which—

  (a)

  is charged on income, and

  (b)

  corresponds to income tax or corporation tax;

  and for this purpose tax may correspond to income tax or corporation tax even though it is payable under the laws of a province, state or other part of a country or is levied by or on behalf of a municipality or other local body;]

• [F32“tax advantage” has the meaning given by section 608W(5);]

• “UK-derived amount” has the meaning given by section 608F;

• “UK sales” has the meaning given by section 608F.]

Chapter 3U.K.Films and sound recordings: non-trade businesses

609Charge to tax on films and sound recordings businessesU.K.

(1)Income tax is charged on income from a business involving the exploitation of films or sound recordings where the activities carried on do not amount to a trade.

Such a business is referred to in this Chapter as a “non-trade business”.

(2)Expressions which are used in this Chapter and in Chapter 9 of Part 2 (trade profits: films and sound recordings) have the same meaning in this Chapter as they do in that Chapter.

610 Income chargedU.K.

(1)Tax is charged under this Chapter on the full amount of the income arising in the tax year.

(2)See sections 612 and 613 for provision about the calculation of the amount of income charged under this Chapter.

(3)This section is subject to Part 8 (foreign income: special rules).

611Person liableU.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.

612Calculation of incomeU.K.

(1)This section applies for calculating the amount of income charged under this Chapter.

(2)Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.

(3)If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.

(4)Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.

(5)Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.

(6)Any relief given as a result of section 613 is additional to the relief under this section.

613Application of trading income rules to non-trade businessesU.K.

The provisions of Chapter 9 of Part 2 apply in relation to non-trade businesses as they apply in relation to trades but as if—

(a)references to a basis period were to a tax year, and

(b)references to anything not constituting trading stock of a trade were omitted.

Chapter 4U.K.Certain telecommunication rights: non-trading income

614Charge to tax on certain telecommunication rights of a non-traderU.K.

(1)Income tax is charged on income derived from a relevant telecommunication right that is not used or held for the purposes of a trade, profession or vocation.

(2)“Relevant telecommunication right” has the same meaning as in Chapter 10 of Part 2 (see section 146).

615Income chargedU.K.

(1)Tax is charged under this Chapter on the full amount of the income arising in the tax year.

(2)See section 617 for provision about the calculation of the amount of certain income charged under this Chapter.

(3)This section is subject to Part 8 (foreign income: special rules).

616Person liableU.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.

617Deductions in calculating certain income chargedU.K.

(1)This section applies for calculating the amount of income charged under this Chapter other than annual payments.

(2)The following sections apply as they apply for the purpose of calculating the profits of a trade, profession or vocation—

(a)section 147 (expenditure and receipts in respect of relevant telecommunication rights treated as revenue in nature), and

(b)section 148 (credits or debits arising from revaluation in respect of relevant telecommunication rights).

(3)Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.

(4)If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.

(5)Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.

(6)Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.

(7)The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.

618Payments received after deduction of taxU.K.

[F34In accordance with section 848 of ITA 2007, a sum representing income tax deducted under Chapter 6 of Part 15 of that Act] from an annual payment within this Chapter is treated as income tax paid by the recipient.

Chapter 5U.K.Settlements: amounts treated as income of settlor [F36or family]

Charge to tax under Chapter 5U.K.

619Charge to tax under Chapter 5U.K.

(1)Income tax is charged on—

(a)income which is treated as income of a settlor as a result of section 624 (income where settlor retains an interest),

(b)income which is treated as income of a settlor as a result of section 629 (income paid to [F37relevant] children of settlor),

(c)capital sums which are treated as income of a settlor as a result of section 633 (capital sums paid to settlor by trustees of settlement), F38...

(d)capital sums which are treated as income of a settlor as a result of section 641 (capital sums paid to settlor by body connected with settlement).

[F39(e)benefits whose amount or value is treated as income of the settlor or a close family member as a result of section 643A (benefits provided out of protected foreign-source income), and

(f)amounts treated as income of the settlor or a close family member by section 643J or 643L (gifts provided out of benefits).]

[F40(2)For the purposes of [F41Chapter 2 of Part 2 of ITA 2007 (rates at which income tax is charged)] , where income of another person is treated as income of the settlor and is charged to tax under subsection (1)(a) or (b) above, it shall be charged in accordance with whichever provisions of the [F42Income Tax Acts] would have been applied in charging it if it had arisen directly to the settlor.]

[F43619AIncome treated as highest part of settlor's total incomeU.K.

(1)This section applies to income which is treated as income of a settlor as a result of section 624 (income where settlor retains an interest) or 629 (income paid to unmarried minor children of settlor).

(2)The income is treated as the highest part of the settlor's total income for the purposes of section 619 (so far as it relates to the income).

(3)See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—

(a)the rule in subsection (2), and

(b)other rules requiring particular income to be treated as the highest part of a person's total income.]

620Meaning of “settlement” and “settlor”U.K.

(1)In this Chapter—

• “settlement” includes any disposition, trust, covenant, agreement, arrangement or transfer of assets (except that it does not include a charitable loan arrangement), and

• “settlor”, in relation to a settlement, means any person by whom the settlement was made.

(2)A person is treated for the purposes of this Chapter as having made a settlement if the person has made or entered into the settlement directly or indirectly.

(3)A person is, in particular, treated as having made a settlement if the person—

(a)has provided funds directly or indirectly for the purpose of the settlement,

(b)has undertaken to provide funds directly or indirectly for the purpose of the settlement, or

(c)has made a reciprocal arrangement with another person for the other person to make or enter into the settlement.

(4)This Chapter applies to settlements wherever made.

(5)In this section—

• “charitable loan arrangement” means any arrangement so far as it consists of a loan of money made by an individual to a charity either—

  (a)

  for no consideration, or

  (b)

  for a consideration which consists only of interest, and

• “charity” includes

  (a)

  [F44the Trustees of the National Heritage Memorial Fund, [F45and]

  (b)

  the Historic Buildings and Monuments Commission for EnglandF46...

  (c)

  F46...]

  .

Income charged and person liableU.K.

621Income chargedU.K.

Tax is charged under this Chapter on all [F47income, capital sums and benefits] to which section 619(1) applies.

622Person liableU.K.

The person liable for any tax charged under this Chapter is the settlor [F48, but this is subject to sections 643A and 643I to 643M.]

Rules for calculating incomeU.K.

623Calculation of incomeU.K.

(1)This section applies for the purpose of calculating the liability to tax of [F49an individual] charged under this Chapter.

(2)The same deductions and reliefs are allowed as would have been allowed if the amount treated as [F50the individual's] income as a result of this Chapter had been received by [F50the individual] as income.

Income treated as income of settlor: retained interestsU.K.

624Income where settlor retains an interestU.K.

(1)Income which arises under a settlement is treated for income tax purposes as the income of the settlor and of the settlor alone if it arises—

(a)during the life of the settlor, and

(b)from property in which the settlor has an interest.

[F51(1A)If the settlement is a trust, expenses of the trustees are not to be used to reduce the income of the settlor.]

(2)For more on a settlor having an interest in property, see section 625.

(3)For exceptions to the rule in subsection (1), see—

• section 626 (exception for outright gifts between spouses [F52or civil partners]),

• section 627 (exceptions for certain types of income), F53...

• section 628 (exception for gifts to charities) [F54, and

• section 628A (exception for protected foreign-source income).]

625Settlor's retained interestU.K.

(1)A settlor is treated for the purposes of section 624 as having an interest in property if there are any circumstances in which the property or any related property—

(a)is payable to the settlor or the settlor's spouse [F55or civil partner] ,

(b)is applicable for the benefit of the settlor or the settlor's spouse [F55or civil partner] , or

(c)will, or may, become so payable or applicable.

(2)Subsection (1) does not apply if the only circumstances are one or more of—

(a)the bankruptcy of a person who is, or may become, beneficially entitled to the property or any related property,

(b)the assignment of the property or any related property by such a person,

(c)the charging of (or, in Scotland, the granting of a right in security over) the property or any related property by such a person,

[F56(d)in the case of a marriage settlement or civil partnership settlement, the death of both parties to the marriage or civil partnership and of all or any of the children of the family of the parties to the marriage or civil partnership, and]

(e)the death of a child of the settlor who had become beneficially entitled to the property or any related property at not more than 25 years old.

[F57(2A)In subsection (2) “child of the family”, in relation to parties to a marriage or civil partnership, means a child of one or both of them.]

(3)Subsection (1) does not apply if—

(a)there are no circumstances in which the property or any related property can become payable or applicable as mentioned in that subsection during the life of a person other than—

(i)the bankruptcy of the person, or

(ii)the assignment or charging of the person's interest in the property or any related property, and

(b)the person is alive and under 25 years old.

(4)In subsection (1) “the settlor's spouse [F58or civil partner]” does not include—

(a)a spouse [F58or civil partner] from whom the settlor is separated under an order of a court or a separation agreement,

(b)a spouse [F58or civil partner] from whom the settlor is separated where the separation is likely to be permanent,

(c)the widow or widower [F59or surviving civil partner] of the settlor, or

(d)a person to whom the settlor is not married but may later marry [F60 or a person of whom the settlor is not a civil partner but of whom the settlor may later be a civil partner] .

(5)In this section “related property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income from it.

626Exception for outright gifts between spouses [F61or civil partners]U.K.

(1)The rule in section 624(1) does not apply in respect of an outright gift—

(a)of property from which income arises,

(b)made by one spouse to the other [F62or one civil partner to the other] , and

(c)meeting conditions A and B.

(2)Condition A is that the gift carries a right to the whole of the income.

(3)Condition B is that the property is not wholly or substantially a right to income.

(4)A gift is not an outright gift for the purposes of this section if—

(a)it is subject to conditions, or

(b)there are any circumstances in which the property, or any related property—

(i)is payable to the giver,

(ii)is applicable for the benefit of the giver, or

(iii)will, or may become, so payable or applicable.

(5)“Related property” has the same meaning in this section as in section 625.

627Exceptions for certain types of incomeU.K.

(1)The rule in section 624(1) does not apply to income which—

(a)arises under a settlement made by one party to a marriage [F63or civil partnership] by way of provision for the other—

(i)after the dissolution or annulment of the marriage [F63or civil partnership] , or

(ii)while they are separated under an order of a court, or under a separation agreement, or where the separation is likely to be permanent, and

(b)is payable to, or applicable for the benefit of, the other party.

(2)The rule in section 624(1) does not apply to income which consists of—

(a)annual payments made by an individual for commercial reasons in connection with the individual's trade, profession or vocation,

(b)qualifying donations for the purposes of [F64Chapter 2 of Part 8 of ITA 2007 (gift aid)] , or

(c)a benefit under a relevant pension scheme.

(3)In subsection (2)(c) “relevant pension scheme” means—

(a)a registered pension scheme,

(b)a pension scheme established by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees (or an annuity acquired using funds held for the purposes of such a pension scheme), or

(c)any pension arrangements of any description prescribed by regulations made under section 11(2)(h) of the Welfare Reform and Pensions Act 1999 (c. 30) or Article 12(2)(h) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11)).

[F65(4)The rule in section 624(1) does not apply in relation to income which—

(a)arises under a settlement, and

(b)originates from any settlor who was not an individual.]

628Exception for gifts to charitiesU.K.

(1)The rule in section 624(1) does not apply to any qualifying income which arises under a [F66UK settlement] if—

(a)it is given by the trustees to a charity in the tax year in which it arises, or

(b)it is income to which a charity is entitled under the terms of the trust.

(2)In this section “qualifying income” means—

(a)income which [F67must] be accumulated,

(b)income which is payable at the discretion of the trustees or any other person F68. . .

(c)income which (before being distributed) is income of any person other than the trustees.

[F69(2A)The cases covered by subsection (2)(b) include cases where the trustees have, or any other person has, any discretion over one or more of the following matters—

(a)whether, or the extent to which, the income is to be accumulated,

(b)the persons to whom the income is to be paid, and

(c)how much of the income is to be paid to any person.]

(3)Subsection (4) applies if in any tax year qualifying income which arises under a [F66UK settlement] from different sources exceeds the total of—

(a)the amount of that income which falls within subsection (1), and

(b)the amount of that income which falls within section 630(1) (comparable exception for income of [F70relevant] children of settlor).

(4)The amount of the qualifying income from different sources which falls within subsection (1) above is rateably apportioned between those sources.

(5)This does not affect the operation of any requirement that the whole, or any specified part, of the income from a particular source is to be given to a charity.

(6)In this section—

• “charity” includes

  (a)

  [F71the Trustees of the National Heritage Memorial Fund, [F72and]

  (b)

  the Historic Buildings and Monuments Commission for EnglandF73...

  (c)

  F73...]

• F74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [F75“UK settlement” means a settlement the trustees of which are resident F76... in the United Kingdom.]

[F77628AException for protected foreign-source incomeU.K.

(1)The rule in section 624(1) does not apply to income which arises under a settlement if it is protected foreign-source income for a tax year.

(2)For this purpose, income arising under a settlement in a tax year is “protected foreign-source income” for the tax year if Conditions A to F are met.

(3)Condition A is that the income would be relevant foreign income if it were income of a UK resident individual.

(4)Condition B is that the income is from property originating from the settlor (see section 645).

(5)Condition C is that when the settlement is created the settlor—

(a)is not domiciled in the United Kingdom, and

(b)if the settlement is created on or after 6 April 2017, is not deemed domiciled in the United Kingdom.

(6)Condition D is that there is no time in the tax year when the settlor is—

(a)domiciled in the United Kingdom, or

(b)deemed domiciled in the United Kingdom by virtue of Condition A in section 835BA of ITA 2007.

(7)Condition E is that the trustees of the settlement are not UK resident for the tax year.

(8)Condition F is that no property or income is provided directly or indirectly for the purposes of the settlement by the settlor, or by the trustees of any other settlement of which the settlor is a beneficiary or settlor, at a time in the relevant period when the settlor is—

(a)domiciled in the United Kingdom, or

(b)deemed domiciled in the United Kingdom.

(9)In subsection (8) “relevant period” means the period—

(a)beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and

(b)ending with the end of the tax year.

(10)For the purposes of Condition F, the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.

(11)Section 628B (tainting) contains further provision for the purposes of Condition F.

(12)In this section “deemed domiciled” means regarded for the purposes of section 809(1)(b) of ITA 2007 as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.

(13)Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of this section.

628BSection 628A: taintingU.K.

(1)This section applies for the purposes of Condition F in section 628A.

(2)Ignore—

(a)property or income provided under a transaction, other than a loan, where the transaction is entered into on arm's length terms,

(b)property or income provided, otherwise than under a loan, without any intention by the person providing it to confer a gratuitous benefit on any person,

(c)the principal of a loan which is made to the trustees of the settlement on arm's length terms,

(d)the payment of interest to the trustees of the settlement under a loan made by them on arm's length terms,

(e)repayment to the trustees of the settlement of the principal of a loan made by them,

(f)property or income provided in pursuance of a liability incurred by any person before 6 April 2017, and

(g)where the settlement's expenses relating to taxation and administration for a tax year exceed its income for that year, property or income provided towards meeting that excess if the value of any such property and income is not greater than the amount of—

(i)the excess, or

(ii)if greater, the amount by which such expenses exceed the amount of such expenses which may be paid out of the settlement's income.

(3)Where—

(a)a loan is made to the trustees of the settlement by the settlor or the trustees of a settlement connected with the settlor, and

(b)the loan is on arm's length terms, but

(c)a relevant event occurs,

the principal of the loan is to be regarded as having been provided to the trustees at the time of that event (despite subsection (2)).

(4)In subsection (3) “relevant event” means—

(a)capitalisation of interest payable under the loan,

(b)any other failure to pay interest in accordance with the terms of the loan, or

(c)variation of the terms of the loan such that they cease to be arm's length terms.

(5)Subsection (6) applies (subject to subsection (7)) where—

(a)the settlor becomes deemed domiciled in the United Kingdom on or after 6 April 2017,

(b)before the date on which the settlor becomes deemed domiciled in the United Kingdom ( “ the deemed domicile date ”), a loan has been made to the trustees of the settlement by—

(i)the settlor, or

(ii)the trustees of a settlement connected with the settlor,

(c)the loan is not entered into on arm's length terms, and

(d)any amount that is outstanding under the loan on the deemed domicile date (“the outstanding amount”) is payable or repayable on demand on or after that date.

(6)Where this subsection applies, the outstanding amount is to be regarded as property directly provided on the deemed domicile date by the lender for the purposes of the settlement (despite subsection (2)).

(7)But if the deemed domicile date is 6 April 2017, subsection (6) does not apply if—

(a)the principal of the loan is repaid, and all interest payable under the loan is paid, before 6 April 2018, or

(b)the loan becomes a loan on arm's length terms before 6 April 2018 and—

(i)before that date interest is paid to the lender in respect of the period beginning with 6 April 2017 and ending with 5 April 2018 as if those arm's length terms had been terms of the loan in relation to that period, and

(ii)interest continues to be payable from 6 April 2018 in accordance with those terms.

(8)For the purposes of this section, a loan is on “arm's length terms”—

(a)in the case of a loan made to the trustees of a settlement, only if interest at the official rate or more is payable at least annually under the loan;

(b)in the case of a loan made by the trustees of a settlement, only if any interest payable under the loan is payable at no more than the official rate.

(9)For the purposes of this section—

• a settlement is “connected” with a person if the person is the settlor or a beneficiary of it;

• “deemed domiciled” has the same meaning as in section 628A;

• “official rate”, in relation to interest, means the rate of interest applicable from time to time under section 178 of FA 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.

628CForeign income arising before, but remitted on or after, 6 April 2017U.K.

(1)For the purposes of applying section 809L of ITA 2007 (meaning of remitted to the UK) in relation to transitional trust income, “relevant person” in that section does not include the trustees of the settlement concerned.

(2)“Transitional trust income” means income—

(a)that arises under a settlement in the period beginning with the tax year 2008-09 and ending with the tax year 2016-17 (“the protection period”),

(b)that would be protected foreign-source income for the purposes of section 628A(1) if section 628A(2)—

(i)had effect for the protection period, and

(ii)so had effect with a reference to conditions A to E (instead of A to F),

(c)that prior to 6 April 2017 has neither been distributed by the trustees of the settlement nor treated under section 624(1) as income of the settlor, and

(d)that would for the tax year in which it arose under the settlement have been treated under section 624(1) as income of the settlor if the settlor had been domiciled in the United Kingdom for that year.

(3)Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted), and corresponding earlier enactments, do not apply for the purposes of subsection (2)(a) and (d).]

Income treated as income of settlor: [F78relevant] childrenU.K.

629Income paid to [F79relevant] children of settlorU.K.

(1)Income which arises under a settlement is treated for income tax purposes as the income of the settlor and of the settlor alone for a tax year if, in that year and during the life of the settlor, it—

(a)is paid to, or for the benefit of, [F80a relevant] child of the settlor, or

(b)would otherwise be treated (apart from this section) as income of [F80a relevant] child of the settlor.

(2)Subsection (1) does not apply to income which is treated as income of the settlor under section 624.

(3)Subsection (1) does not apply in relation to a child's relevant settlement income in any tax year if, in that year, the total amount of that income does not exceed £100.

(4)In subsection (3) a child's “relevant settlement income” means income—

(a)which is paid to or for the benefit of, or otherwise treated as income of, the child, and

(b)which (apart from subsection (3)) would be treated as income of the settlor under subsection (1).

(5)Subsection (1) does not apply so far as provided by section 630 (exception for gifts to charities) [F81or section 630A (exception for protected foreign-source income)].

(6)See—

• section 631 for the treatment for the purposes of subsection (1) of retained or accumulated income, and

• section 632 for the treatment for the purposes of this section and section 631 of certain deemed income connected to offshore income gains.

(7)In this section and sections 631 and 632—

(a)“child” includes a stepchild,

(b)“minor” means a person under the age of 18 years, and “minor child” is to be read accordingly, F82. . .

(c)references to payments include payments in money's worth [F83, and]

[F84(d)“relevant child” means a minor child who is unmarried or not in a civil partnership.]

[F85(8)Subsection (1) is subject to section 28A of FA 2005.]

630Exception for gifts to charitiesU.K.

(1)The rule in section 629(1) does not apply to any qualifying income which arises under a UK trust if—

(a)it is given by the trustees to a charity in the tax year in which it arises, or

(b)it is income to which a charity is entitled under the terms of the trust.

(2)Subsection (3) applies if in any tax year qualifying income which arises under a UK trust from different sources exceeds the total of—

(a)the amount of that income which falls within subsection (1), and

(b)the amount of that income which falls within section 628(1) (comparable exception for income where settlor retains an interest).

(3)The amount of the qualifying income from different sources which falls within subsection (1) above is rateably apportioned between those sources.

(4)This does not affect the operation of any requirement that the whole, or any specified part, of the income from a particular source is to be given to a charity.

(5)In this section “charity”, “qualifying income” and “UK trust” have the same meaning as in section 628.

[F86630AException for protected foreign-source incomeU.K.

(1)The rule in section 629(1) does not apply to income which arises under a settlement if it is protected foreign-source income for a tax year.

(2)Sections 628A(2) to (12) and 628B (meaning of “protected foreign-source income”) have effect also for this purpose.

(3)Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of this section.]

631Retained and accumulated incomeU.K.

(1)This section applies if—

(a)the trustees of a settlement retain or accumulate income arising under the settlement, and

(b)a payment is subsequently made in connection with the settlement to, or for the benefit of, [F87a child of the settlor who is unmarried or not in a civil partnership].

(2)The payment is treated for the purposes of section 629(1) as a payment of income, but only so far as there is retained or accumulated income available.

(3)For the purposes of subsection (1) a payment is made in connection with a settlement if it is made by virtue of or in consequence of—

(a)the settlement, or

(b)any enactment relating to the settlement.

(4)For the purposes of subsection (2) retained or accumulated income is available at any time when—

(5)In subsection (4) “disregarded income” means any income arising under the settlement since it was made which has been—

(a)treated as income of the settlor,

(b)paid (whether as income or capital) to, or for the benefit of, a beneficiary other than [F88a relevant] child of the settlor,

(c)otherwise treated as the income of such a beneficiary,

(d)treated as income of an unmarried minor child of the settlor, and subject to income tax, in any of the tax years 1995-96, 1996-97 and 1997-98, or

(e)applied in meeting expenses of the trustees which—

(i)were properly chargeable to income, or

(ii)would have been so chargeable but for any express [F89terms of the settlement].

(6)For the purposes of subsection (5)(d), income arising under the settlement that is treated as income of the child is subject to income tax so far as it does not exceed the taxable amount.

(7)In subsection (6) “the taxable amount”, in relation to a tax year, means the amount by which—

632Offshore income gainsU.K.

(1)This section applies if—

(a)an offshore income gain accrues in respect of a disposal by a trustee of assets held by the trustee for a minor, and

(b)the minor would be absolutely entitled as against the trustee but for being a minor.

(2)The income which, under [F91regulation 17 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (charge to tax)], is treated as arising by reference to that gain is treated for the purposes of sections 629 and 631 as paid to the minor.

(3)In this section “offshore income gain” has the same meaning as in [F92Chapter 5 of Part 2 of those Regulations].

Capital sums treated as income of settlor: trustees' paymentsU.K.

633Capital sums paid to settlor by trustees of settlementU.K.

(1)Any capital sum paid directly or indirectly in any tax year by the trustees of a settlement to the settlor is treated for income tax purposes as follows.

(2)The sum is treated as the income of the settlor for the tax year so far as the amount of the sum falls within the amount of income available up to the end of the year.

(3)The sum is treated as the income of the settlor for the following year so far as the amount of the sum—

(a)is not treated under subsection (2) as the settlor's income for the tax year in which it is paid, and

(b)falls within the amount of the income available up to the end of the following year.

(4)Subsection (3) also applies for each subsequent year up to a maximum of 10 years subsequent to the tax year in which the sum is paid.

(5)For this purpose the reference in subsection (3)(a) to being treated under subsection (2) as the settlor's income for the tax year in which the capital sum is paid is a reference to being treated under subsection (2) or (3) as the settlor's income for that year and any other year before the subsequent year in question.

(6)For the meaning of certain expressions used in this section, see—

• section 634 (meaning of “capital sum” and “sums paid to settlor”),

• section 635 (amount of available income),

• section 636 (calculation of undistributed income), and

• section 637 (qualifications to section 636).

(7)For other provisions, see—

• section 638 (capital sums paid by way of loan or repayment of loan),

• section 639 (loans to participators in close companies), and

• section 640 (grossing-up of deemed income).

634Meaning of “capital sum” and “sums paid to settlor”U.K.

(1)In this Chapter “capital sum” means—

(a)any sum paid by way of loan or repayment of a loan, and

(b)any other sum which—

(i)is paid otherwise than as income, and

(ii)is not paid for full consideration in money or money's worth.

(2)But this is subject to subsections (3) to (6).

(3)It does not include any sum which could not have become payable to the settlor except—

(a)in one of the circumstances mentioned in subsection (2) of section 625, or

(b)on the death under the age of 25 of any person of the kind mentioned in subsection (3) of that section.

(4)It does include a sum treated as a capital sum by subsection (5) below.

(5)Any sum which—

(a)is paid by the trustees of a settlement to a third party—

(i)at the settlor's direction, or

(ii)as a result of the assignment by the settlor of the settlor's right to receive the sum, or

(b)is otherwise paid, or applied by, the trustees for the benefit of the settlor,

is treated as a capital sum paid to the settlor by the trustees.

(6)Subsection (5) does not apply to any sum which would, apart from that subsection, be treated as a capital sum paid to the settlor.

(7)References in sections 633 to 638 to sums paid to the settlor include references to sums paid to—

(a)the spouse [F93or civil partner] of the settlor, or

(b)the settlor (or the spouse [F93or civil partner] of the settlor) jointly with another person.

635Amount of available incomeU.K.

(1)For the purposes of section 633 the amount of income available up to the end of any tax year is, in relation to any capital sum paid as mentioned in subsection (1) of that section by the trustees of a settlement, calculated as follows.

(2)Add together the amount of [F94unprotected] income arising under the settlement in that year and any previous year which has not been distributed.

(3)Deduct from that figure—

(a)the amount of that income taken into account under section 633 in relation to that sum in any previous year or years,

(b)the amount of that income taken into account under section 633 in relation to any other capital sums paid to the settlor in any year before that sum was paid,

(c)any income arising under the settlement in that year or any previous year which has been treated as income of the settlor under section 624 or 629, and

(d)an amount equal to the sum of tax at the [F95trust rate] on—

(i)the total amount of [F96unprotected] income arising under the settlement in that year and any previous year which has not been distributed, less

(ii)any income of the kind mentioned in paragraph (c).

(4)See sections 636 and 637 for how to calculate amounts of undistributed income.

[F97(5)In [F98this section and sections 636 and 637] “unprotected income” means income which is not protected foreign-source income, and sections 628A(2) to (13) and 628B (meaning of “protected foreign-source income”) have effect also for this purpose.]

636Calculation of undistributed incomeU.K.

(1)For the purposes of section 635, [F99unprotected] income arising under a settlement in any tax year is treated as [F99unprotected] income which has not been distributed so far as it exceeds the total amount of—

(a)the sums to which subsection (2) applies,

(b)the expenses to which subsection (4) applies, and

(c)if the trustees of the settlement are trustees for charitable purposes, the amount to which subsection (6) applies.

(2)This subsection applies to F100... sums paid in the tax year to any persons by the trustees of the settlement [F101that are payments of unprotected income, or sums treated as representing unprotected income, and that]—

(a)are treated in that year (otherwise than under section 633) as the income of those persons for income tax purposes, or

(b)would be [F102treated as mentioned in paragraph (a)] if those persons were domiciled [F103and resident] in the United Kingdom and the sums had been paid to them there.

(3)Subsection (2) is subject to section 637(1).

(4)This subsection applies to any expenses of the trustees of the settlement paid in the tax year which, in the absence of any express provision of the settlement, would be properly chargeable to [F104unprotected] income.

(5)Subsection (4)—

(a)does not apply to expenses so far as they are included in the sums mentioned in subsection (2), and

(b)is subject to section 637(2) to (7).

(6)This subsection applies to the amount by which—

[F107(7)This subsection applies to the following provisions of ITA 2007—

• section 521(4) (gifts entitling donor to gift-aid relief),

• section 522(5) (gifts of money from companies),

• section 523(5) (payments from other charities),

• section 524 (profits etc of charitable trades),

• section 529 (profits from fund-raising events),

• section 530 (profits from lotteries),

• section 531 (property income etc),

• section 532 (savings and investment income),

• section 533 (public revenue dividends),

• section 536 (miscellaneous income), and

• section 537 (income from estates in administration).]

637Qualifications to section 636U.K.

(1)Section 636(2) does not apply—

(a)to any interest paid by the trustees of the settlement, or

(b)to any sums paid to—

(i)a body corporate connected with the settlement, or

(ii)the trustees of another settlement made by the settlor or by the trustees of the settlement.

(2)Section 636(4) applies to any [F108relevant] interest paid by the trustees of the settlement subject to subsections (3) to (7).

(3)The whole of any [F109relevant] interest paid by the trustees of the settlement is excluded from subsection (4) of section 636 if no sums within subsection (2) of that section were paid to any person other than the settlor or the spouse [F110or civil partner] of the settlor.

(4)If any sum within section 636(2) was so paid, the relevant fraction of any [F111relevant] interest paid by the trustees of the settlement is excluded from section 636(4).

(5)The relevant fraction is—

(6)Subsections (2) to (5) do not apply to—

(a)interest in respect of which relief from tax is allowable under any provision of the Income Tax Acts, or

(b)interest payable to the settlor or the spouse [F114or civil partner] of the settlor if living with the settlor.

(7)Nothing in subsections (2) to (6) affects the liability to tax of the person receiving or entitled to the interest.

[F115(7A)In this section “relevant interest” means interest which, in the absence of any express provision of the settlement, would be properly chargeable to unprotected income.]

(8)For the purposes of this Chapter, a body corporate is treated as connected with a settlement in any tax year if at any time in that year—

(a)it is a close company (or only is not a close company because it is non-UK resident) and the participators then include the trustees of the settlement, or

(b)it is controlled by a company falling within paragraph (a).

Trustees' payments: further provisionsU.K.

638Capital sums paid by way of loan or repayment of loanU.K.

(1)No part of a capital sum which is paid to a settlor by way of loan is treated under section 633 as the settlor's income for any tax year after the tax year in which the whole of the sum is repaid.

(2)Subsection (3) applies if—

(a)a capital sum is paid to the settlor by way of loan, and

(b)one or more capital sums have previously been paid to the settlor by way of loan and wholly repaid.

(3)The amount of the capital sum mentioned in subsection (2)(a) is treated for the purposes of section 633 as equal to the amount (if any) by which it exceeds so much of the capital sum or sums previously paid as has already been treated as the settlor's income under that section.

(4)Subsection (5) applies if—

(a)a capital sum is paid to the settlor by way of complete repayment of a loan, and

(b)an amount not less than the capital sum is subsequently lent by the settlor to the trustees of the settlement.

(5)No part of the capital sum is treated under section 633 as the settlor's income for any tax year after that in which the further loan is made.

639Loans to participators in close companiesU.K.

(1)This section applies if any amount has been included in a person's income under Chapter 6 of Part 4 (release of loan to participator in close company) in respect of any loan or advance.

(2)There is a corresponding reduction in the amount (if any) afterwards falling to be so included under section 633 in respect of the loan or advance.

640Grossing-up of deemed incomeU.K.

(1)The whole or any part of a capital sum which is treated under section 633 as income of the settlor for any tax year is treated as income of an amount equal to the sum or the part of the sum, grossed up by reference to the [F116trust rate] for that year.

(2)The deductible amount is to be set off against the amount of tax charged on any amount treated under section 633 as income of the settlor for any year.

(3)In subsection (2) the “deductible amount” is an amount equal to—

(a)tax at the [F116trust rate] for the year on the amount treated under section 633 as the settlor's income,

(b)so much of the amount of tax at that rate as is equal to the tax charged, or

(c)the amount of tax paid by the trustees on the grossed-up amount of so much of the amount of income available up to the end of the year, in relation to the capital sum, as is taken into account under section 633 in relation to that sum in that year (see subsections (4) to (7) below),

whichever is the least.

(4)For the purposes of subsection (3)(c)—

(a)any reduction falling to be made under section 635(3)(d) is treated as made against income arising under the settlement in an earlier tax year before income arising under the settlement in a later tax year, and

(b)income arising under the settlement in an earlier tax year is treated as taken into account under section 633 before income arising under the settlement in a later tax year.

(5)For the purposes of subsection (3)(c)—

(a)the grossed-up amount of any sum is an amount equal to the sum, grossed up by reference to the appropriate rate for each part of the sum, and

(b)the amount of tax paid by the trustees on that grossed-up amount is the difference between the grossed-up amount and the sum in question.

(6)For the purposes of subsection (5)—

(a)the appropriate rate for any part of a sum is 0% if—

(i)the income that falls to be treated in accordance with subsection (4) as representing that part of the sum is income from a source outside the United Kingdom, and

(ii)the trustees were non-UK resident for the relevant tax year, and

(b)the appropriate rate for any part of a sum in relation to which paragraph (a) does not apply is—

(i)34%, if the relevant tax year is the year 2003-04 or any earlier tax year, F117...

(ii)40%, if the relevant tax year is the year 2004-05 or any subsequent tax year [F118up to and including the year 2009-2010, F119...

( iii)50%, if the relevant tax year is the year 2010-2011] [F120 , 2011-12 or 2012-13, and ] .

[F121(iv)45%, if the relevant year is the year 2013-14 or any subsequent tax year.]

(7)In subsection (6) “the relevant tax year”, in relation to any part of a sum, means the tax year in which the income treated in accordance with subsection (4) as representing that part of the sum arose under the settlement.

Capital sums treated as income of settlor: connected bodiesU.K.

641Capital sums paid to settlor by body connected with settlementU.K.

(1)This section applies if—

(a)a capital sum is paid to the settlor in a tax year by any body corporate connected with the settlement in that year, and

(b)an associated payment has been, or is, made directly or indirectly to the body by the trustees of the settlement.

(2)The capital sum is, in accordance with this section, treated for the purposes of section 633 as having been paid to the settlor by the trustees of the settlement.

(3)A capital sum to which subsection (2) applies is treated as having been paid to the settlor in the tax year in which it is paid so far as the amount of the sum falls within the total of the associated payment or payments made up to the end of the year.

(4)A capital sum to which subsection (2) applies is treated as having been paid to the settlor in the following year so far as the amount of the sum—

(a)is not treated as paid to the settlor in the year mentioned in subsection (3), and

(b)falls within the total of the associated payment or payments made up to the end of the following year (less what was taken into account under subsection (3) in relation to the sum in the previous year).

(5)Subsection (4) also applies for each subsequent year.

(6)In its application to a subsequent year—

(a)the references to the following year are to the subsequent year,

(b)the reference to the year mentioned in subsection (3) is to that year and any other year before the subsequent year, and

(c)the reference to what was taken into account under subsection (3) in relation to the sum in the previous year is to what was taken into account under this section in relation to the sum in the previous years.

(7)See also—

• section 642 (exception for certain loans or repayments of loans), and

• section 643 (interpretation of sections 641 and 642).

642Exception for certain loans or repayments of loansU.K.

(1)Section 641 does not apply to any sum paid to the settlor by way of loan or repayment of a loan if conditions A and B are met.

(2)Condition A is that the whole of the loan is repaid within 12 months of the date on which it was made.

(3)Condition B is that the period for which amounts are outstanding in respect of relevant loans in any period of 5 years is not more than 12 months.

(4)In subsection (3) “relevant loans” means loans made—

(a)to the settlor by the body corporate connected with the settlement or by any other body corporate so connected, or

(b)by the settlor to the body corporate connected with the settlement or to any other body corporate so connected.

643Interpretation of sections 641 and 642U.K.

(1)Any question in section 641 or 642 whether a capital sum has been paid—

(a)to the settlor by a body corporate, or

(b)to a body corporate by the trustees,

is determined in the same way as any question under section 633 whether a capital sum has been paid to the settlor by the trustees.

(2)For the circumstances in which a body corporate is treated for the purposes of this Chapter as connected with a settlement, see section 637(8).

(3)In section 641 and this section “associated payment”, in relation to any capital sum paid to the settlor by a body corporate, means—

(a)any capital sum paid to the body by the trustees of the settlement, and

(b)any other sum paid, or asset transferred, to the body by the trustees which is not paid or transferred for full consideration in money or money's worth,

being any sum paid, or asset transferred, in the 5 years ending or beginning with the date on which the capital sum is paid to the settlor.

(4)For the purposes of sections 641 and 642 and this section any capital sum paid by a body corporate, and any associated payment made to a body corporate, at a time when it is (within the meaning of [F122section 449 of CTA 2010]) associated with another body corporate may be treated as paid by, or made to, the other body corporate.

[F123Benefits matched with protected foreign-source incomeU.K.

643ADeemed income because of benefits for settlor or close family memberU.K.

(1)If an individual has an untaxed benefits total for a settlement for a tax year (see section 643B), an amount equal to so much of that total as does not exceed the settlement's available protected income up to the end of the year (see section 643C) is—

(a)where the individual is UK resident for the year, treated for income tax purposes as income of the individual for the year, subject to subsections (2) to (5), and

(b)where the individual is non-UK resident for the year, treated for the purposes of subsection (2) and sections 643I to 643L (but no other purpose) as income of the individual for the year, subject to subsection (5).

(2)Subsections (3) and (4) apply if—

(a)an amount (“the deemed income”) is treated by subsection (1), before the application of subsections (3) and (4), as income of an individual for a tax year,

(b)the individual is not the settlor,

(c)either—

(i)the individual is non-UK resident for the year, or

(ii)the individual is UK resident for the year and one of sections 809B, 809D and 809E of ITA 2007 (remittance basis) applies to the individual for the year,

(d)the settlor is UK resident for the year,

(e)there is no time in the year when the settlor is domiciled in the United Kingdom, and

(f)there is no time in the year when the settlor is regarded for the purposes of section 809B(1)(b) of ITA 2007 as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect because of Condition A in that section being met.

(3)If the case is one—

(a)where the condition in subsection (2)(c)(i) is met, or

(b)where the condition in subsection (2)(c)(ii) is met and none of the deemed income is remitted to the United Kingdom in the year,

the deemed income is to be treated for income tax purposes as income of the settlor for the year and, in a case within paragraph (b), not as income of the individual for the year.

(4)If the case is one—

(a)where the condition in subsection (2)(c)(ii) is met, and

(b)part only of the deemed income is remitted to the United Kingdom in the year,

the remainder of the deemed income is to be treated for income tax purposes not as income of the individual for the year but as income of the settlor for the year.

(5)If there is a choice about the individuals in whose case income is to be treated as arising by subsection (1) (before the application of subsections (3) and (4))—

(a)income is to be treated as arising to such one or more of them as appears to an officer of Revenue and Customs to be just and reasonable, and

(b)if more than one, in such respective proportions as appears to the officer to be just and reasonable.

(6)Sections 809L to 809Z6 of ITA 2007 (remittance basis: rules about when income is remitted) apply for the purposes of this section.

(7)If—

(a)an enactment other than this section contains a reference (however expressed) to—

(i)income treated as arising by this section, or

(ii)an amount treated as income by this section, and

(b)the reference mentions this section without mentioning any particular provision of this section,

the reference is (in accordance with subsection (1)(b)) to be read as not including amounts treated as income by subsection (1)(b) except so far as they are treated as income of the settlor of a settlement by subsection (3) or (4).

643BMeaning of “untaxed benefits total” in section 643AU.K.

(1)For the purposes of section 643A, whether an individual has an untaxed benefits total for a settlement for a tax year (“the current year”), and (if so) its amount, are determined as follows—

• Step 1 If the individual is the settlor, identify each benefit provided by the trustees to the individual at a time—

  (a)

  when the individual is not relevantly domiciled, and

  (b)

  in a tax year that is the current year or an earlier tax year.

  If the individual is not the settlor, identify each benefit provided by the trustees to the individual at a time—

  (a)

  when the individual is a close member of the settlor's family (see section 643H), and

  (b)

  in a tax year that is the current year or an earlier tax year.

• Step 2 Identify the amount or value of each benefit identified in the individual's case at Step 1, and calculate the total of those amounts and values.

• Step 3 Take the total calculated at Step 2 and deduct from it the following—

  (a)

  any part of it on which the individual is liable to income tax otherwise than under section 643A,

  (b)

  any income treated by section 643A, 643J or 643L as arising, to a person for a tax year earlier than the current year, by reference to any of the benefits identified in the individual's case at Step 1,

  (c)

  where the whole or part of a benefit identified in the individual's case at Step 1 is taken into account in charging income tax under Chapter 2 of Part 13 of ITA 2007, the amount or value of so much of the benefit as is taken into account in doing that, and

  (d)

  any amount required to be deducted by section 643D(2) (gains treated as accruing in a year before the current year).

• Step 4 If the result of the calculation at Step 3 is an amount greater than nil, that amount is the individual's untaxed benefits total for the settlement for the current year.

(2)For the purposes of Step 1 in subsection (1), an individual is “relevantly domiciled” at any time if at that time—

(a)the individual is domiciled in the United Kingdom, or

(b)the individual is regarded for the purposes of section 809(1)(b) of ITA 2007 as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect because of Condition A in that section being met.

(3)Sections 742C to 742E of ITA 2007 (value of certain benefits) apply for the purpose of calculating the value of a benefit for the purposes of this section as they apply for the purpose of calculating an income tax charge under Chapter 2 of Part 13 of ITA 2007.

(4)In this section and sections 643C to 643M, a reference to a benefit provided by trustees of a settlement is to—

(a)a benefit treated by subsection (6) as provided by the trustees, or

(b)any other benefit if it is provided by the trustees directly, or indirectly, out of—

(i)property comprised in the settlement, or

(ii)income arising under the settlement.

(5)In this section and sections 643C to 643M, a reference to a benefit provided by trustees of a settlement to an individual is to—

(a)a benefit treated by subsection (6) as provided by the trustees to the individual, or

(b)any other benefit if it is provided by the trustees to the individual directly, or indirectly, out of—

(i)property comprised in the settlement, or

(ii)income arising under the settlement.

(6)Where—

(a)income arises under a settlement, and

(b)the income, before being distributed, is the income of a person other than the trustees,

a benefit is for the purposes of subsection (4)(a) treated as provided by the trustees and is for the purposes of subsection (5)(a) treated as provided by the trustees to the person.

(7)A benefit treated as provided by subsection (6) is treated—

(a)as consisting of the income mentioned in that subsection, but after any reduction in accordance with Chapter 8 of Part 9 of ITA 2007 for trustees' expenses, and

(b)as provided at the time that income arises.

643CMeaning of “available protected income” in section 643AU.K.

(1)For the purposes of the application of section 643A(1) in the case of an individual and a settlement, the settlement has available protected income up to the end of a tax year if—

and, if the settlement has available protected income up to the end of a tax year, its amount is given by—

(2)In this section—

• PFSI is the total of—

  (a)

  any protected foreign-source income—

  (i)

  arising under the settlement in the year or in any earlier tax year,

  (ii)

  that would be treated under section 624 as income of the settlor but for section 628A,

  (iii)

  that can be used directly or indirectly to provide benefits for the individual, and

  (iv)

  on which the individual is not liable to income tax (ignoring for this purpose any liability under section 643A), and

  (b)

  any protected foreign-source income—

  (i)

  arising under the settlement in the year or in any earlier tax year,

  (ii)

  that would be treated under section 629 as income of the settlor but for section 630A, and

  (iii)

  on which the relevant child concerned (see section 629) is not liable to income tax (ignoring for this purpose any liability under section 643A),

• TOAA is so much of PFSI as is, in respect of benefits provided by the trustees in the year or in an earlier tax year, taken into account in charging income tax under Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) for the year or any earlier tax year, and

• TI is the total of—

  (a)

  so much of PFSI as is, by reference to benefits provided by the trustees to the individual, treated by section 643A, 643J or 643L as income for any earlier tax year, and

  (b)

  so much of PFSI as is, by reference to benefits provided by the trustees to other individuals, treated by section 643A, 643J or 643L as income for the year or any earlier tax year.

(3)As regards the definition of PFSI in subsection (2)—

(a)section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of that definition,

(b)that definition has effect as if section 648(3) to (5) do not apply for the purposes of sections 624 and 629, and

(c)in that definition “protected foreign-source income” has the meaning given by sections 628A(2) to (13) and 628B.

643DReduction in section 643A income: previous capital gains tax chargeU.K.

(1)Subsection (2) applies if—

(a)in the case of a settlement, benefits provided to an individual as mentioned at Step 1 in section 643B(1) are received in a tax year, and

(b)chargeable gains are treated by section 87, 87K, 87L or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to a person in that or a subsequent tax year by reference (direct or indirect) to the whole or part of any benefits so provided.

(2)In the calculation under section 643B of the individual's untaxed benefits total for the settlement for any tax year after the one in which such chargeable gains are so treated, the amounts to be deducted at Step 3(d) of that calculation include the amount of those gains.

(3)References in this section to chargeable gains treated as accruing to an individual include offshore gains treated as arising to the individual (see regulations 20 and 22 to 24 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)).

643EReimbursement of tax paid by settlor because of section 643AU.K.

(1)Where any tax for which the settlor of a settlement is liable as a result of section 643A(3) or (4) is paid, the settlor is entitled to recover the amount of the tax from the individual concerned.

(2)For the purpose of recovering that amount, the settlor is entitled to require an officer of Revenue and Customs to give the settlor a certificate specifying—

(a)the amount of the income concerned, and

(b)the amount of tax paid,

and any such certificate is conclusive evidence of the facts stated in it.

643FIncome attributed by section 643A to user of remittance basisU.K.

(1)This section applies where—

(a)in the case of a settlement, income (“the deemed income”) is treated by section 643A as arising to an individual for a tax year, and

(b)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year.

(2)The deemed income is treated as relevant foreign income of the individual.

(3)In the application of section 832 to the deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

(4)For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis) treat a benefit, or any protected income, that relates to any part of the deemed income as deriving from that part of the deemed income.

(5)In subsection (4) “relates” has the meaning given by section 643G.

(6)In this section and section 643G—

• “protected income” means the income that forms PFSI in the calculation of the settlement's available protected income in the case of the relevant individual for the year, and

• “the relevant individual”—

  (a)

  where the deemed income is treated as income of an individual by section 643A(1)(a) both before and after the application of section 643A(3) and (4), means that individual, and

  (b)

  where the deemed income is treated as income of the settlor by section 643A(3) or (4) after having been treated as income of another individual by section 643A(1), means that other individual.

643GSection 643F(4): benefits and income “relating” to deemed incomeU.K.

(1)In this section—

(a)references to a step are to a step under section 643B(1) as it applies in the case of the settlement, the year and the relevant individual,

(b)“protected income” and “the relevant individual” have the meaning given by section 643F(6), and

(c)“the settlement” and “the year” mean, respectively, the settlement and tax year mentioned in section 643F.

(2)For the purposes of section 643F(4)—

(a)place the benefits identified at Step 1 in the order in which they were received by the relevant individual (starting with the earliest benefit received),

(b)where a deduction is allowed by any of paragraphs (a), (c) and (d) of Step 3 by reference to the whole or part of any of those benefits, reduce the benefit by the amount of the deduction,

(c)place the protected income in the order in which it arose (starting with the earliest income to arise),

(d)where the whole or part of an item of the protected income is, in respect of benefits provided by the trustees in the year or in any earlier tax year, taken into account in charging income tax under Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) for the year or any earlier tax year, reduce the item by so much of itself as is so taken into account,

(e)where the whole or part of an item of the protected income is, by reference to benefits provided by the trustees to individuals other than the relevant individual, treated by section 643A or 643J or 643L as income for the year or any earlier tax year, reduce the item by so much of itself as is so treated,”

(f)place the income treated by section 643A(1) (before the application of section 643A(3) and (4)) as arising to the relevant individual in respect of the benefits referred to in paragraph (a) in the order in which it is treated as arising (starting with the earliest income treated as having arisen), and

(g)treat the income mentioned in paragraph (f) as related to—