Income Tax Act 2007

Part 14U.K.Income tax liability: miscellaneous rules

[F1Chapter A1U.K.Remittance basis

IntroductionU.K.

809AOverview of ChapterU.K.

This Chapter provides for an alternative basis of charge in the case of individuals who are not domiciled in the United Kingdom F2....

Application of remittance basisU.K.

809BClaim for remittance basis to applyU.K.

(1)This section applies to an individual for a tax year if the individual—

(a)is UK resident [F3for that year] ,

(b)is not domiciled in the United Kingdom in that year F4..., and

(c)makes a claim under this section for that year.

[F5(1A)Section 835BA (deemed domicile) applies for the purposes of subsection (1)(b).]

F6(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)Sections 42 and 43 of TMA 1970 (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to a claim under this section as they apply in relation to a claim for relief.

809CClaim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to applyU.K.

(1)This section applies to an individual for a tax year if the individual—

(a)is aged 18 or over in that year, and

[F7(b)meets F8... the 12-year residence test or the 7-year residence test for that year.]

F9(1ZA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F10(1A)An individual meets the 12-year residence test for a tax year if the individual—

F11(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F12(b)has been UK resident in at least 12 of the 14 tax years immediately preceding that year.]

(1B)An individual meets the 7-year residence test for a tax year if the individual—

(a)does not meet F13... the 12-year residence test for that year, but

(b)has been UK resident in at least 7 of the 9 tax years immediately preceding that year.]

(2)A claim under section 809B by the individual for that year must contain a nomination of the income or chargeable gains of the individual for that year to which section 809H(2) is to apply.

(3)The income or chargeable gains nominated must be part (or all) of the individual's foreign income and gains for that year.

(4)The income and chargeable gains nominated must be such that the relevant tax increase does not exceed [F14—

F15(za). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)for an individual who meets the 12-year residence test for that year, [F16£60,000];

(b)for an individual who meets the 7-year residence test for that year, £30,000.]

(5)“The relevant tax increase” is—

(a)the total amount of income tax and capital gains tax payable by the individual for that year, minus

(b)the total amount of income tax and capital gains tax that would be payable by the individual for that year apart from section 809H(2).

[F17(5A)The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).]

(6)See section 809Z7 for the meaning of an individual's foreign income and gains for a tax year.

809DApplication of remittance basis without claim where unremitted foreign income and gains under £2,000U.K.

(1)This section applies to an individual for a tax year if—

(a)the individual is UK resident [F18for that year] ,

(b)the individual is not domiciled in the United Kingdom in that year F19..., and

(c)the amount of the individual's unremitted foreign income and gains for that year is less than £2,000.

[F20unless condition A or condition B is met.]

[F21(1A)Condition A is that F22... conditions A to F in section 828B are met.

(1B)Condition B is that the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year.]

(2)The amount of an individual's “unremitted” foreign income and gains for a tax year is—

(a)the total amount of what would (if this section applied) be the individual's foreign income and gains for that year, minus

(b)the total amount of those income and gains that are remitted to the United Kingdom in that year.

809EApplication of remittance basis without claim: other casesU.K.

(1)This section applies to an individual for a tax year if—

(a)the individual is UK resident [F23for that year],

(b)the individual is not domiciled in the United Kingdom in that year F24...,

[F25(c)for that year the individual either has no UK income or gains or has no UK income and gains other than taxed investment income not exceeding £100.]

(d)no relevant income or gains are remitted to the United Kingdom in that year, and

(e)either—

(i)the individual has been UK resident in not more than 6 of the 9 tax years immediately preceding that year, or

(ii)the individual is under 18 throughout that year

[F26unless the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year.]

[F27(1A)Section 835BA (deemed domicile) applies for the purposes of subsection (1)(b).]

(2)For the purposes of subsection (1)(c) the individual's UK income and gains for the tax year are the individual's income and chargeable gains for that year other than what would (if this section applied) be the individual's foreign income and gains for that year.

[F28(2A)For the purposes of subsection (1)(c) “taxed investment income” means UK income or gains consisting of payments within section 946 from which a sum representing income tax has been deducted.]

(3)For the purposes of subsection (1)(d) relevant income and gains are—

(a)what would (if this section applied) be the individual's foreign income and gains for the tax year mentioned in subsection (1), and

(b)the individual's foreign income and gains for every other tax year for which section 809B or 809D or this section applies to the individual.

Effect of section 809B, 809D or 809E applyingU.K.

809FEffect on what is chargeableU.K.

(1)This section applies if section 809B, 809D or 809E applies to an individual for a tax year.

(2)The individual's relevant foreign earnings for that year are charged in accordance with section 22 or 26 of ITEPA 2003.

(3)The individual's relevant foreign income for that year is charged in accordance with section 832 of ITTOIA 2005.

(4)[F29The] individual's foreign chargeable gains for that year are charged in accordance with [F30paragraph 1 of Schedule 1 to TCGA 1992].

(5)For the effect on amounts which count as employment income of the individual under certain provisions of Part 7 of ITEPA 2003 (employment-related securities), see Chapter 5A of Part 2 of that Act.

[F31(5A)For the effect on amounts which count as employment income under Chapter 2 of Part 7A of ITEPA 2003, see sections 554Z9 to 554Z11 of that Act.]

(6)Nothing in this section applies in relation to nominated income or chargeable gains (see section 809H).

809GClaim for remittance basis: effect on allowances etcU.K.

(1)This section applies if section 809B (claim for remittance basis to apply) applies to an individual for a tax year.

(2)For that year, the individual is not entitled to—

(a)any allowance under Chapter 2 of Part 3 (personal allowance and blind person's allowance),

(b)any tax reduction under Chapter 3 of that Part (tax reductions for married couples and civil partners), F32...

[F33(ba)any tax reduction under Chapter 3A of that Part (transferable tax allowance for married couples and civil partners), or]

(c)any relief under section 457 [F34or 458] (payments for life insurance etc).

(3)See also [F35section 1K(6)] of TCGA 1992 (no annual exempt amount for chargeable gains).

809HClaim for remittance basis by long-term UK resident: chargeU.K.

(1)This section applies if—

(a)section 809B (claim for remittance basis to apply) applies to an individual for a tax year (“the relevant tax year”),

(b)the individual is aged 18 or over in the relevant tax year, and

[F36(c)the individual meets F37... the 12-year residence test or the 7-year residence test for the relevant tax year.]

[F38(1A)See section [F39809CF40..., (1A)] and (1B) for when an individual meets F41... the 12-year residence test or the 7-year residence test for a tax year.]

(2)Income tax is charged on nominated income, and capital gains tax is charged on nominated chargeable gains, as if section 809B did not apply to the individual for the relevant tax year (and neither did section 809D).

(3)“Nominated” income or chargeable gains means income or chargeable gains nominated under section 809C in the individual's claim under section 809B for the relevant tax year.

[F42(3A)If the individual is a Scottish taxpayer for the relevant tax year, the individual is to be treated for the purpose of calculating income tax charged by virtue of subsection (2) as if the individual were not a Scottish taxpayer for that year.]

[F43(3B)If the individual is a Welsh taxpayer for the relevant tax year, the individual is to be treated for the purpose of calculating income tax charged by virtue of subsection (2) as if the individual were not a Welsh taxpayer for that year.]

(4)If the relevant tax increase would otherwise be less than [F44the applicable amount], subsection (2) has effect as if—

(a)in addition to the income and gains actually nominated under section 809C in the individual's claim under section 809B for the relevant tax year, an amount of income had been nominated so as to make the relevant tax increase equal to [F44the applicable amount], and

(b)the individual's income for that year were such that such a nomination could have been made (if that is not the case).

(5)“The relevant tax increase” is—

(a)the total amount of income tax and capital gains tax payable by the individual for the relevant tax year, minus

(b)the total amount of income tax and capital gains tax that would be payable by the individual for the relevant tax year apart from subsection (2).

[F45(5A)The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).]

[F46(5B)The applicable amount” is—

F47(za). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)if the individual meets the 12-year residence test for the relevant tax year, [F48£60,000];

(b)if the individual meets the 7-year residence test for the relevant tax year, £30,000.]

(6)Nothing in subsection (4) affects what is regarded, for the purposes of section 809I or 809J, as nominated under section 809C.

809IRemittance basis charge: income and gains treated as remittedU.K.

(1)This section applies if—

(a)any of an individual's nominated income and gains is remitted to the United Kingdom in a tax year, F49...

(b)any of the individual's remittance basis income and gains has not been remitted to the United Kingdom in or before that year[F50, and

(c)the £10 test is met for that year.]

(2)Income tax and capital gains tax are charged, for that year and subsequent tax years, as if the income and chargeable gains treated under section 809J as remitted to the United Kingdom by the individual in that tax year had been so remitted (and income and chargeable gains of the individual that were actually remitted in that year had not been).

(3)An individual's “nominated income and gains” are the total income and chargeable gains nominated by the individual under section 809C for the tax year mentioned in subsection (1)(a) or any earlier tax year [F51(each such year for which the individual has made a nomination under that section being referred to as a “nomination year”)].

(4)An individual's “remittance basis income and gains” are the foreign income and gains of the individual for all the tax years (up to and including the tax year mentioned in subsection (1)(a)) for which section 809B, 809D or 809E applies to the individual, apart from the individual's nominated income and gains.

[F52(5)The £10 test is met for the tax year mentioned in subsection (1)(a) (“year X”) if, taking each nomination year separately, the cumulative total as respects at least one nomination year exceeds £10.

(6)In relation to a nomination year—

(a)“the cumulative total” means the sum, for all the tax years in aggregate up to and including year X, of the amounts of relevant income and gains remitted to the United Kingdom in those tax years from that nomination year, and

(b)“relevant income and gains” means the income and chargeable gains nominated by the individual under section 809C for that nomination year.]

809JSection 809I: order of remittancesU.K.

(1)If section 809I applies, the following steps are to be taken for the purpose of determining the income or gains treated in a tax year (“the relevant tax year”) as remitted to the United Kingdom by the individual.

Step 1

Find the total amount of—

(a)the individual's nominated income and gains, and

(b)the individual's remittance basis income and gains,

that have been remitted to the United Kingdom in the relevant tax year.

This amount is “the relevant amount”.

Step 2

Find the amount of foreign income and gains of the individual for the relevant tax year (other than income or chargeable gains nominated under section 809C) that is within each of the categories of income and gains in paragraphs (a) to (h) of subsection (2).

If none of sections 809B, 809D and 809E apply to the individual for that year, treat those amounts as nil (and accordingly go to step 6).

Step 3

Find the earliest paragraph for which the amount determined under step 2 is not nil.

If that amount does not exceed the relevant amount, treat the individual as having remitted the income or gains within that paragraph (and for that tax year).

Otherwise, treat the individual as having remitted the relevant proportion of each kind of income or gains within that paragraph (and for that tax year).

“The relevant proportion” is the relevant amount divided by the amount determined under step 2 for that paragraph.

Step 4

Reduce the relevant amount by the amount taken into account under step 3.

Step 5

If the relevant amount (as reduced under step 4) is not nil, start again at step 3.

In step 3, read the reference to the earliest paragraph of the kind mentioned there as a reference to the earliest such paragraph which has not previously been taken into account under that step.

Step 6

If the relevant amount (as reduced) is not nil once steps 3 to 5 have been undertaken in relation to all paragraphs of subsection (2) for which the amount determined under step 2 is not nil, start again at step 2.

In step 2, read the reference to the foreign income and gains of the individual for the relevant tax year as a reference to such of the foreign income and gains of the individual for the appropriate tax year as had not been remitted by the beginning of the relevant tax year.

“The appropriate tax year” is the latest tax year which is—

(a)before the last tax year for which step 2 has been undertaken, and

(b)a tax year for which section 809B, 809D or 809E applies to the individual.

(2)The kinds of income and gains are—

(a)relevant foreign earnings (other than those subject to a foreign tax),

(b)foreign specific employment income (other than income subject to a foreign tax),

(c)relevant foreign income (other than income subject to a foreign tax),

(d)foreign chargeable gains (other than gains subject to a foreign tax),

(e)relevant foreign earnings subject to a foreign tax,

(f)foreign specific employment income subject to a foreign tax,

(g)relevant foreign income subject to a foreign tax, and

(h)foreign chargeable gains subject to a foreign tax.

(3)In this section the individual's “nominated income and gains” are the total income and chargeable gains nominated by the individual under section 809C for the relevant tax year or any earlier tax year.

(4)In step 1 of subsection (1) the individual's “remittance basis income and gains” are the foreign income and gains of the individual for all the tax years (up to and including the relevant tax year) for which section 809B, 809D or 809E applies to the individual, apart from the individual's nominated income and gains.

(5)In step 6 of subsection (1) the reference to income or gains being remitted is—

(a)as respects any tax year before section 809I applies, to income or gains being remitted to the United Kingdom, and

(b)as respects any tax year in relation to which that section applies, to income or gains treated under this section as so remitted.

(6)In subsection (2) “foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

Remittance of income and gains: introductionU.K.

809KSections 809L to 809Z6: introductionU.K.

(1)Sections 809L to 809Z6 apply for the purposes of—

(a)this Chapter,

(b)sections 22 and 26 of ITEPA 2003 (relevant foreign earnings charged on remittance basis),

[F53(c)Chapter 5B of Part 2 of that Act (taxable specific income from employment-related securities etc: internationally mobile employees),]

[F54(ca)sections 554Z9 to 554Z11 of that Act (employment income provided through third parties charged on remittance basis),]

(d)section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis), and

[F55(e)Schedule 1 to TCGA 1992 (UK resident individuals not domiciled in UK).]

(2)Those sections—

(a)explain what is meant by income or chargeable gains being “remitted to the United Kingdom” (sections 809L to 809O),

(b)provide for the calculation of the amount remitted (section 809P),

(c)contain rules for attributing transfers from mixed funds to particular kinds of income and capital (sections 809Q to 809S),

(d)contain supplementary provision for certain cases (sections 809T and 809U), and

(e)treat income or chargeable gains as not remitted to the United Kingdom in certain cases (sections [F56809UA] to 809Z6).

Remittance of income and gains: meaning of “remitted to the United Kingdom”U.K.

809LMeaning of “remitted to the United Kingdom”U.K.

(1)An individual's income is, or chargeable gains are, “remitted to the United Kingdom” if—

(a)conditions A and B are met,

(b)condition C is met, or

(c)condition D is met.

(2)Condition A is that—

(a)money or other property is brought to, or received or used in, the United Kingdom by or for the benefit of a relevant person, or

(b)a service is provided in the United Kingdom to or for the benefit of a relevant person.

(3)Condition B is that—

(a)the property, service or consideration for the service is (wholly or in part) the income or chargeable gains,

(b)the property, service or consideration—

(i)derives (wholly or in part, and directly or indirectly) from the income or chargeable gains, and

(ii)in the case of property or consideration, is property of or consideration given by a relevant person,

(c)the income or chargeable gains are used outside the United Kingdom (directly or indirectly) in respect of a relevant debt, or

(d)anything deriving (wholly or in part, and directly or indirectly) from the income or chargeable gains is used as mentioned in paragraph (c).

(4)Condition C is that qualifying property of a gift recipient—

(a)is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person,

(b)is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or

(c)is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt.

(5)Condition D is that property of a person other than a relevant person (apart from qualifying property of a gift recipient)—

(a)is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person,

(b)is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or

(c)is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt,

in circumstances where there is a connected operation.

(6)In a case where subsection (4)(a) or (b) or (5)(a) or (b) applies to the importation or use of property, the income or chargeable gains are taken to be remitted at the time the property or service is first enjoyed by a relevant person by virtue of that importation or use.

(7)In this section “relevant debt” means a debt that relates (wholly or in part, and directly or indirectly) to—

(a)property falling within subsection (2)(a),

(b)a service falling within subsection (2)(b),

(c)qualifying property dealt with as mentioned in subsection (4)(a),

(d)a service falling within subsection (4)(b),

(e)qualifying property dealt with as mentioned in subsection (5)(a), or

(f)a service falling within subsection (5)(b).

F57(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)The cases in which [F58property (including income or chargeable gains) is used in respect of a debt include cases where the property is] used to pay interest on the debt.

(10)This section is subject to sections 809V to 809Z6 (property treated as not remitted to the United Kingdom).

809MMeaning of “relevant person”U.K.

(1)This section applies for the purposes of [F59this Chapter].

(2)A “relevant person” is—

(a)the individual,

(b)the individual's husband or wife,

(c)the individual's civil partner,

(d)a child or grandchild of a person falling within any of paragraphs (a) to (c), if the child or grandchild has not reached the age of 18,

(e)a close company in which a person falling within any other paragraph of this subsection is a participator [F60or a company which is a 51% subsidiary of such a close company],

(f)a company in which a person falling within any other paragraph of this subsection is a participator, and which would be a close company if it were resident in the United Kingdom, [F61 or a company which is a 51% subsidiary of such a company, ]

(g)the trustees of a settlement of which a person falling within any other paragraph of this subsection is a beneficiary, or

(h)a body connected with such a settlement.

(3)For that purpose—

[F62(a)two people living together as if they were a married couple or civil partners are treated as if they were spouses or civil partners of each other,]

(c)“close company” [F63is to be read in accordance with Chapter 2 of Part 10 of CTA 2010 (see in particular section 439 of that Act)],

[F64(ca)“participator”, in relation to a close company, means a person who is a participator in relation to the company for the purposes of [F65section 455 of CTA 2010 (see sections 454 and 455(5) of] that [F66Act) and, in relation to a company that would be a close company if it were resident in the United Kingdom, means a person who would be such a participator if it were a close company,]

(cb)“51% subsidiary” has the same meaning as in the Corporation Tax Acts (see [F67Chapter 3 of Part 24 of CTA 2010]),]

(d)“settlement” and “settlor” have the same meaning as in Chapter 2 of Part 9,

(e)“beneficiary”, in relation to a settlement, means any person who receives, or may receive, any benefit under or by virtue of the settlement,

(f)“trustee” has the same meaning as in section 993 (see, in particular, section 994(3)), and

(g)a body is “connected with” a settlement if the body falls within section 993(3)(c), (d), (e) or (f) as regards the settlement.

809NSection 809L: gift recipients, qualifying property and enjoymentU.K.

(1)This section applies for the purposes of determining whether or not income or chargeable gains of an individual are remitted to the United Kingdom by virtue of condition C in section 809L.

(2)A “gift recipient” means a person, other than a relevant person, to whom the individual makes a gift of money or other property that—

(a)is income or chargeable gains of the individual, or

(b)derives (wholly or in part, and directly or indirectly) from income or chargeable gains of the individual.

(3)The question of whether or not a person is a relevant person is to be determined by reference to the time when a gift is made.

(4)But, if a person to whom a gift is made subsequently becomes a relevant person, the person ceases to be a gift recipient.

(5)The individual “makes a gift of” property if the individual disposes of the property—

(a)for no consideration, or

(b)for consideration less than the full consideration in money or money's worth that would be given if the disposal were by way of a bargain made at arm's length;

but, in a case falling in paragraph (b), the individual is to be taken to make a gift of only so much of the property as exceeds the consideration actually given.

(6)A reference to the individual making a gift of property includes a case where—

(a)the individual retains an interest in the property, or

(b)an interest, right or arrangement enables or entitles the individual to benefit from the property.

(7)“Qualifying property”, in relation to a gift recipient, is—

(a)the property that the individual gave to the gift recipient,

(b)anything that derives (wholly or in part, and directly or indirectly) from that property, or

(c)any other property, but only if it is dealt with as mentioned in section 809L(4)(a), (b) or (c) by virtue of an operation which is effected—

(i)with reference to the gift of the property to the gift recipient, or

(ii)with a view to enabling or facilitating the gift of the property to the gift recipient to be made.

(8)In subsection (7)—

(a)the reference in paragraph (b) to anything deriving from property, and

(b)the reference in paragraph (c) to other property,

includes a thing, or property, that does not belong to the individual but which the individual is enabled or entitled to benefit from by virtue of any interest, right or arrangement.

(9)Enjoyment by a relevant person of property or a service is to be disregarded in any of these cases—

(a)if the property or service is enjoyed virtually to the entire exclusion of all relevant persons,

(b)if full consideration in money or money's worth is given by a relevant person for the enjoyment, or

(c)if the property or service is enjoyed by relevant persons in the same way, and on the same terms, as it may be enjoyed by the general public or by a section of the general public.

809OSection 809L: dealings where there is a connected operationU.K.

(1)This section applies for the purposes of determining whether or not income or chargeable gains of an individual are remitted to the United Kingdom by virtue of condition D in section 809L.

(2)For the purposes of section 809L(5), the question of whether or not the person whose property is dealt with as mentioned in paragraph (a), (b) or (c) of section 809L(5) is a relevant person is to be determined by reference to the time when the property is so dealt with.

(3)A “connected operation”, in relation to property dealt with as mentioned in section 809L(5)(a), (b) or (c), means an operation which is effected—

(a)with reference to a qualifying disposition, or

(b)with a view to enabling or facilitating a qualifying disposition.

(4)A “qualifying disposition”is a disposition that—

(a)is made by a relevant person,

(b)is made to, or for the benefit of, the person whose property is dealt with as mentioned in section 809L(5)(a), (b) or (c), and

(c)is a disposition of money or other property that is, or derives (wholly or in part, and directly or indirectly) from, income or chargeable gains of the individual.

(5)But a disposition of property is not a qualifying disposition if the disposition is, or is part of, the giving of full consideration in money or money's worth for the dealing that falls within section 809L(5)(a), (b) or (c).

(6)Enjoyment by a relevant person of property or a service is to be disregarded in any of these cases—

(a)if the property or service is enjoyed virtually to the entire exclusion of all relevant persons,

(b)if full consideration in money or money's worth is given by a relevant person for the enjoyment, or

(c)if the property or service is enjoyed by relevant persons in the same way, and on the same terms, as it may be enjoyed by the general public or by a section of the general public.

Remittance of income and gains: amount remittedU.K.

809PSection 809L: amount remittedU.K.

(1)The amount of income or chargeable gains remitted to the United Kingdom is to be determined as follows.

(2)If the property, service or consideration is the income or chargeable gains, the amount remitted is equal to the amount of the income or chargeable gains.

(3)If the property, service or consideration derives from the income or chargeable gains, the amount remitted is equal to the amount of income or chargeable gains from which the property, service or consideration derives.

(4)If the income or chargeable gains are used as mentioned in section 809L(3)(c), the amount remitted is equal to the amount of income or chargeable gains used; but this is subject to subsection (10).

(5)If anything deriving from the income or chargeable gains is used as mentioned in section 809L(3)(c), the amount remitted is equal to the amount of income or chargeable gains from which what is used derives; but this is subject to subsection (10).

(6)In a case falling within section 809L(4)(a) or (b), the amount remitted is equal to the amount of the relevant income or chargeable gains.

(7)In a case falling within section 809L(4)(c), the amount remitted is equal to the amount of the relevant income or chargeable gains; but this is subject to subsection (10).

(8)In a case falling within section 809L(5)(a) or (b), the amount remitted is equal to the amount of the income or chargeable gains referred to in section 809O(4)(c).

(9)In a case falling within section 809L(5)(c), the amount remitted is equal to the amount of the income or chargeable gains referred to in section 809O(4)(c); but this is subject to subsection (10).

(10)If the debt is only partly in respect of the property or service, the amount remitted is (if it would otherwise be greater) limited to the amount the debt would be if it were wholly in respect of the property or service.

(11)In subsections (6) and (7) “relevant income or chargeable gains” means—

(a)if the qualifying property falls within section 809N(7)(a), the income or gains—

(i)of which the qualifying property consists, or

(ii)from which the qualifying property derives;

(b)if the qualifying property falls within section 809N(7)(b), the income or gains—

(i)of which the property given to the gift recipient consisted, or

(ii)from which that property derived;

(c)if the qualifying property falls within section 809N(7)(c), the income or gains—

(i)of which the property given to the gift recipient consists, or

(ii)from which that property derives.

(12)If the amount remitted (taken together with any amount previously remitted) would otherwise exceed the amount of the income or chargeable gains, the amount remitted is limited to the amount which (when taken together with any amount previously remitted) is equal to the amount of the income or chargeable gains.

[F68(13)If the property forms part of a set only part of which is in the United Kingdom, the amount remitted is such portion of what it would have been had the complete set been brought to, or received or used in, the United Kingdom when the part was as is just and reasonable (having regard to the part of the set which is there).]

Remittance of income and gains: transfers from mixed fundsU.K.

809QSections 809L and 809P: transfers from mixed fundsU.K.

(1)This section applies for the purposes mentioned in subsection (2) where condition A in section 809L is met and—

(a)the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, a transfer from a mixed fund, or

(b)a transfer from a mixed fund, or anything deriving (wholly or in part, and directly or indirectly) from such a transfer, is used as mentioned in section 809L(3)(c).

[F69(1A)But this section must be read subject to section 809RA.]

(2)The purposes referred to in subsection (1) are—

(a)determining whether condition B in section 809L is met, and

(b)if it is met, determining (under section 809P) the amount of income or chargeable gains remitted.

(3)The extent to which the transfer is of the individual's income or chargeable gains is to be determined as follows.

Step 1

For each of the categories of income and capital in paragraphs (a) to (i) of subsection (4), find (applying section 809R) the amount of income or capital of the individual for the relevant tax year in the mixed fund immediately before the transfer.

“The relevant tax year” is the tax year in which the transfer occurs.

Step 2

Find the earliest paragraph for which the amount determined under step 1 is not nil.

If that amount does not exceed the amount of the transfer, treat the transfer as containing the income or capital within that paragraph (and for that tax year).

Otherwise, treat the transfer as containing the relevant proportion of each kind of income or capital within that paragraph (and for that tax year).

“The relevant proportion” is the amount of the transfer divided by the amount determined under step 1 for that paragraph.

Step 3

Treat the amount of the transfer as reduced by the amount taken into account under step 2.

Step 4

If the amount of the transfer (as reduced under step 3) is not nil, start again at step 2.

In step 2, read the reference to the earliest paragraph of the kind mentioned there as a reference to the earliest such paragraph which has not previously been taken into account under that step in relation to the transfer.

Step 5

If the amount of the transfer (as reduced under step 3) is not nil once steps 2 and 3 have been undertaken in relation to all paragraphs of subsection (4) for which the amount determined under step 1 is not nil, start again at step 1.

In step 1, read the reference to the relevant tax year as a reference to the tax year immediately before the last tax year for which step 1 has been undertaken in relation to the transfer.

(4)The kinds of income and capital are—

(a)employment income (other than income within paragraph (b), (c) or (f)),

(b)relevant foreign earnings (other than income within paragraph (f)),

(c)foreign specific employment income (other than income within paragraph (f)),

(d)relevant foreign income (other than income within paragraph (g)),

(e)foreign chargeable gains (other than chargeable gains within paragraph (h)),

(f)employment income subject to a foreign tax,

(g)relevant foreign income subject to a foreign tax,

(h)foreign chargeable gains subject to a foreign tax, and

(i)income or capital not within another paragraph of this subsection.

(5)In subsection (4) “foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

(6)In this section “mixed fund” means money or other property which, immediately before the transfer, contains or derives from—

(a)more than one of the kinds of income and capital mentioned in subsection (4), or

(b)income or capital for more than one tax year.

(7)References in this section to the amount of the transfer include the market value of it.

(8)References in this section and section 809R to anything deriving from income or capital within paragraph (i) of subsection (4) do not include—

(a)income or gains within any of paragraphs (a) to (h) of that subsection, or

(b)anything deriving from such income or gains.

809RSection 809Q: composition of mixed fundU.K.

(1)This section applies for the purposes of step 1 of section 809Q(3) (composition of mixed fund).

(2)Treat property which derives wholly or in part (and directly or indirectly) from an individual's income or capital for a tax year as consisting of or containing that income or capital.

(3)If a debt relating (wholly or in part, and directly or indirectly) to property is at any time satisfied (wholly or in part) by—

(a)an individual's income or capital for a tax year, or

(b)anything deriving (directly or indirectly) from such income or capital,

from that time treat the property as consisting of or containing the income or capital if and to the extent that it is just and reasonable to do so.

(4)Treat an offshore transfer from a mixed fund as containing the appropriate proportion of each kind of income or capital in the fund immediately before the transfer.

“The appropriate proportion” means the amount (or market value) of the transfer divided by the market value of the mixed fund immediately before the transfer.

(5)A transfer from a mixed fund is an “offshore transfer” for the purposes of subsection (4) if and to the extent that section 809Q does not apply in relation to it.

(6)Treat a transfer from a mixed fund as an “offshore transfer” (and section 809Q as not applying in relation to it, if it otherwise would do) if and to the extent that, at the end of a tax year in which it is made—

(a)section 809Q does not apply in relation to it, and

(b)on the basis of the best estimate that can reasonably be made at that time, section 809Q will not apply in relation to it.

(7)In this section ‘mixed fund’ means money or other property containing or deriving from—

(a)more than one of the kinds of income and capital mentioned in section 809Q(4), or

(b)income or capital for more than one tax year.

(8)If section 809Q applies in relation to part of a transfer, apply that section in relation to that part before applying subsection (4) in relation to the rest of the transfer.

(9)If section 809Q applies in relation to more than one transfer from a mixed fund, when undertaking step 1 in relation to the second or any subsequent transfer take into account the effect of step 2 of section 809Q(3) (composition of transfer) as it applied in relation to each earlier transfer.

[F70809RASpecial mixed fund rules for certain employment casesU.K.

(1)This section applies if—

(a)an individual has general earnings from an employment for a tax year,

(b)those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

(c)at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into an account in that tax year at a time (a “relevant time”) when the account is a qualifying account of the individual, and

(d)at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in that tax year at a relevant time.

(2)If this section applies, the composition of each transfer made from the account in that tax year at a relevant time is to be determined as follows—

• Step 1 Suppose that all the condition A transfers made from the account in the tax year at a relevant time had been a single transfer made from the account at the end of the tax year.

• Step 2 Suppose that all the other transfers made from the account in the tax year at a relevant time had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in step 1.

• Step 3 Applying those suppositions—

  (a)

  find under section 809Q(3) the extent to which the single transfer mentioned in step 1 is of the individual's income or chargeable gains, and

  (b)

  find under section 809R(4) the content of the single offshore transfer mentioned in step 2.

• Step 4 Each transfer made from the account in the tax year at a relevant time is to be treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.“The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.“The relevant deemed transfer” is—

  (a)

  if the transfer is a condition A transfer, the single transfer mentioned in step 1, and

  (b)

  otherwise, the single offshore transfer mentioned in step 2.

(3)Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter.

(4)If the tax year is the tax year in which the account becomes a qualifying account, for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling before the qualifying date for the account as a separate tax year.

(5)If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule—

(a)subsection (2) has effect as if references to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account, and

(b)for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling after the day mentioned in paragraph (a) as a separate tax year.

(6)A transfer from the account is a “condition A transfer” if and to the extent that—

(a)condition A in section 809L is met, and

(b)either—

(i)the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or

(ii)the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c).

(7)A transfer from the account is an “other transfer” if and to the extent that it is not a condition A transfer.

(8)Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year—

(a)it is not a condition A transfer, and

(b)on the basis of the best estimate that can reasonably be made at that time, it will not become a condition A transfer.

(9)If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule, subsection (8) has effect as if the reference to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account.

(10)“Qualifying account” and “the qualifying date” for an account are defined in section 809RB.

(11)For the purposes of this section and sections 809RB to 809RD—

(a)“employment” is to be read in accordance with section 4(1) of ITEPA 2003, and includes an office (as read in accordance with section 5(3) of that Act),

(b)whether general earnings are “for” a tax year is to be determined as for the purposes of the employment income Parts of ITEPA 2003 (see section 3(2) of that Act),

(c)a reference to anything “paid into” an account includes anything credited to the account by whatever means, and

(d)references to a breach of the deposit rule are to be read in accordance with section 809RC.

809RBQualifying accountsU.K.

(1)An individual may by notice to the Commissioners nominate an account to be a qualifying account of the individual for the purposes of section 809RA.

(2)The notice must specify the qualifying date for the account.

(3)“The qualifying date” for the account is the first date on which there is paid into the account sums falling within subsection (4) which (in total) are more than £10.

(4)A sum falls within this subsection if it is, or derives wholly (whether directly or indirectly) from, general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment.

(5)A tax year is a “relevant” tax year in relation to an employment if the general earnings which the individual has for the tax year from the employment include both general earnings within section 15(1) of ITEPA 2003 and general earnings within section 26(1) of that Act.

(6)The individual may withdraw the nomination by giving a further notice to the Commissioners, specifying the date with effect from which the nomination is withdrawn.

(7)A notice under subsection (1) or (6) must be in writing and include such information as the Commissioners may reasonably require.

(8)A notice under subsection (1) or (6) must be given no later than—

(a)31 January in the tax year following the tax year in which falls, as the case may be—

(i)the qualifying date for the account, or

(ii)the date with effect from which the nomination is withdrawn, or

(b)such later date as the Commissioners may allow.

(9)If an individual nominates an account under this section, the account is a “qualifying account” of the individual throughout the period—

(a)beginning with the qualifying date, and

(b)ending with the date before the earliest of the following dates—

(i)the date on which the account is closed or ceases to be an ordinary bank account held by and for the benefit of the individual (alone or jointly with others);

(ii)the date with effect from which the nomination is withdrawn under this section;

(iii)the qualifying date for another qualifying account of the individual;

(iv)6 April in a tax year in which there is a breach of the deposit rule which is not remedied or cannot be remedied;

(v)6 April in a tax year for which the individual has no general earnings within section 26(1) of ITEPA 2003.

(10)The account is not to be a qualifying account at all if—

(a)at any time on the qualifying date, the account is not an ordinary bank account held by and for the benefit of the individual (alone or jointly with others), or

(b)immediately before the qualifying date, the account has a credit balance of more than £10.

(11)The account is not to be a qualifying account at all if the qualifying date falls in a tax year—

(a)for which the individual has no general earnings within section 26(1) of ITEPA 2003, or

(b)in which there is a breach of the deposit rule which is not remedied or cannot be remedied.

(12)Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the breach occurs on or after a date falling within subsection (9)(b)(i) to (iii).

(13)If, apart from this subsection, an individual might have nominated two or more accounts for which the qualifying date would be the same, the individual may nominate only one of those accounts.

(14)If, apart from this subsection, an account would be a qualifying account of two or more individuals at any time, it is not to be a qualifying account of either or any of them at that time or any other time.

(15)For the purposes of this section an account is an “ordinary bank account” if it is a cash account in a bank (whether a current or savings account) where sums standing to the credit of the account from time to time represent a debt owed by the bank to the account-holder.

809RCBreaches of the deposit ruleU.K.

(1)There is a breach of the deposit rule if a prohibited sum is paid into the account on or after the qualifying date.

(2)A breach of the deposit rule is remedied if, within 30 days beginning with the day on which the individual became or ought reasonably to have become aware of the payment of the prohibited sum, the required amount is transferred out of the account by way of a single one-off transfer.

(3)“The required amount” is an amount equal to—

(a)the prohibited sum, plus

(b)all the other prohibited sums (if any) that have been paid into the account since that sum was paid in.

(4)If there are 3 breaches of the deposit rule in any 12 month period, subsection (2) does not apply to the third breach and, accordingly, the third breach cannot be remedied.

(5)The payment of a prohibited sum (“the later prohibited sum”) into the account does not result in a breach of the deposit rule if—

(a)a breach resulting from an earlier payment of a prohibited sum into the account is remedied, and

(b)the later prohibited sum is represented by the required amount in relation to that breach.

(6)A “prohibited sum” is anything other than a sum that is, or derives wholly (whether directly or indirectly) from, any of the following kinds of income or capital—

(a)general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment,

(b)general earnings of the individual from an employment which consist of money and are paid in a tax year which is a relevant tax year in relation to the employment,

(c)an amount of specific employment income which, by virtue of Part 6, 7 or 7A of ITEPA 2003 or any other enactment, counts as employment income of the individual in respect of an employment for a tax year which is a relevant tax year in relation to the employment,

(d)interest on the account, or

(e)consideration for the disposal of employment-related securities or employment-related securities options in the circumstances described in subsection (7).

(7)The circumstances are—

(a)the securities or options were acquired pursuant to a right or opportunity available by reason of an employment of the individual,

(b)the disposal is or occurs in conjunction with, or as soon as reasonably practicable after, a relevant event involving those securities or options, and

(c)the tax year in which the relevant event occurs is a relevant tax year in relation to the employment.

(8)For the purposes of subsection (7) each of the following is a “relevant event”—

(a)the acquisition mentioned in subsection (7)(a), and

(b)any event on the occurrence of which an amount (if positive) counts as employment income by virtue of Part 7 of ITEPA 2003 or would do so but for—

(i)section 421E or 474 of that Act (exclusions: residence etc), or

(ii)an election under section 430 or 431 of that Act.

(9)For the purposes of this section a tax year is a “relevant” tax year in relation to an employment if—

(a)the individual has general earnings from the employment for the tax year,

(b)those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

(c)at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into the account in the tax year, and

(d)at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in the tax year.

(10)For the purposes of this section—

(a)“employment-related securities” has the meaning given in section 421B(8) of ITEPA 2003, and

(b)“employment-related securities options” has the meaning given in section 471(5) of that Act.

809RDEffect where 30-day deadline is metU.K.

(1)This section applies if the required amount in relation to a breach of the deposit rule was transferred out of the account in accordance with section 809RC(2).

(2)Sections 809Q and 809R have effect as if—

(a)the intervening transactions had never taken place, and

(b)each prohibited sum represented by the required amount had instead been transferred directly (at the time that sum was paid into the qualifying account) into the account or other property into which the required amount was transferred by virtue of the single one-off transfer.

(3)Each of the following is an “intervening transaction”—

(a)each payment into the qualifying account of a prohibited sum represented by the required amount, and

(b)the single one-off transfer out of the qualifying account.

(4)If it is supposed under step 1 or 2 of section 809RA(2) that a single transfer had been made in the intervening period, re-apply section 809Q or 809R in relation to that transfer taking account of subsection (2).

(5)“The intervening period” is the period—

(a)beginning with the day on which the breach occurred, and

(b)ending with the day on which the single one-off transfer was made in accordance with section 809RC(2).

(6)If more than one transfer of a sum equal to the required amount was transferred out of the qualifying account within the 30-day grace period, the first of those transfers is assumed to be the single one-off transfer.

(7)“The 30-day grace period” is the period of 30 days mentioned in section 809RC(2).]

809SSection 809Q: anti-avoidanceU.K.

(1)This section applies if, by reason of an arrangement the main purpose (or one of the main purposes) of which is to secure an income tax advantage or capital gains tax advantage, a mixed fund would otherwise be regarded as containing income or capital within any of paragraphs (f) to (i) of section 809Q(4).

(2)Treat the mixed fund as containing so much (if any) of the income or capital as is just and reasonable.

(3)“Arrangement” includes any scheme, understanding, transaction or series or transactions (whether or not enforceable).

[F71(4)Income tax advantage” means—

(a)a relief from income tax or increased relief from income tax,

(b)a repayment of income tax or increased repayment of income tax,

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

(d)the avoidance of a possible assessment to income tax;

F72...

(4A)For the purposes of subsection (4)(c) and (d) it does not matter whether the avoidance or reduction is effected—

(a)by receipts accruing in such a way that the recipient does not pay or bear income tax on them, or

(b)by a deduction in calculating profits or gains.]

(5)“Capital gains tax advantage” means—

(a)a relief from capital gains tax or increased relief from capital gains tax,

(b)a repayment of capital gains tax or increased repayment of capital gains tax,

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

(d)the avoidance of a possible assessment to capital gains tax.

Remittance of income and gains: supplementaryU.K.

809TForeign chargeable gains accruing on disposal made [F73otherwise] than for full considerationU.K.

(1)This section applies if—

(a)foreign chargeable gains accrue to an individual on the disposal of an asset, and

(b)the individual does not receive consideration for the disposal of an amount [F74at least] equal to the market value of the asset.

(2)For the purposes of this Chapter treat the asset as deriving from the chargeable gains.

809UDeemed income or gains not to be regarded as remitted before time when they are treated as arising or accruingU.K.

Where—

(a)income or foreign chargeable gains are treated as arising or accruing, and

(b)by virtue of anything done in relation to anything regarded as deriving from the income or chargeable gains, the income or chargeable gains would otherwise be regarded as remitted to the United Kingdom before the time when they are treated as arising or accruing,

treat the income or chargeable gains as remitted to the United Kingdom at that time.

[F75Relief for money used to pay tax etc]U.K.

[F76809UAMoney used for payments on accountU.K.

(1)Subsection (2) applies to income or chargeable gains of an individual if—

(a)the income or gains would (but for subsection (2)) be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom,

(b)the money is brought to the United Kingdom by way of direct payments to the Commissioners on account of income tax,

(c)the tax year (“tax year 2”) in respect of which the payments on account are made is a tax year for which section 809H (remittance basis charge for long-term UK resident) does not apply as respects the individual, and

(d)that section applied as respects the individual for the previous tax year (“tax year 1”).

(2)The relevant amount of income or chargeable gains is to be treated as not remitted to the United Kingdom if money equal to the relevant amount is taken offshore by—

(a)the 15 March following the end of tax year 2, or

(b)such later date as the Commissioners may allow on a claim made by the individual.

(3)A claim under subsection (2)(b)—

(a)may be made only if the individual has made and delivered a return under section 8 of TMA 1970 for tax year 2 and reasonably expects to receive from the Commissioners a repayment of tax paid in respect of that tax year, and

(b)may be made no later than the 5 April following the end of tax year 2.

(4)Money that is taken offshore in accordance with subsection (2) is to be treated as having the same composition of kinds of income and capital as the money used to make the payments on account.

(5)In this section “the relevant amount” means the lower of the following—

(a)the amount brought to the United Kingdom as mentioned in subsection (1)(b), and

(b)the applicable amount (as defined in section 809H) for tax year 1.]

[F77809VMoney paid to the CommissionersU.K.

(1)Subsection (2) applies to income or chargeable gains of an individual if—

(a)the income or gains would (but for subsection (2)) be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom,

(b)the money is brought to the United Kingdom by way of one or more direct payments to the Commissioners, and

(c)the payments are made in relation to a tax year to which section 809H applies as regards the individual.

(2)The income or chargeable gains are to be treated as not remitted to the United Kingdom to the extent that the payments do not exceed the applicable amount (as defined in section 809H).

(3)Subsection (2) does not apply to payments if or to the extent that they are repaid by the Commissioners.]

[F78Business investment reliefU.K.

809VAMoney or other property used to make investmentsU.K.

(1)Subsection (2) applies if—

(a)a relevant event occurs,

(b)but for subsection (2), income or chargeable gains of an individual would be regarded as remitted to the United Kingdom by virtue of that event, and

(c)the individual makes a claim for relief under this section.

(2)The income or gains are to be treated as not remitted to the United Kingdom.

(3)A “relevant event” occurs if money or other property—

(a)is used by a relevant person to make a qualifying investment, or

(b)is brought to or received in the United Kingdom in order to be used by a relevant person to make a qualifying investment.

(4)Subsection (1)(b) includes a case where income or gains would be treated under section 809Y as remitted to the United Kingdom by virtue of the relevant event.

(5)Subsection (2) applies by virtue of subsection (3)(b) to the extent only that the investment is made within the period of 45 days beginning with the day on which the money or other property is brought to or received in the United Kingdom.

(6)Where some but not all of the money or other property is used to make the investment within that 45-day period, the part of the income or gains to which subsection (2) applies is to be determined on a just and reasonable basis.

(7)Subsection (2) does not apply if the relevant event occurs, or the investment is made, as part of or as a result of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(8)A claim for relief under this section must be made on or before the first anniversary of the 31 January following the tax year in which the income or gains would, but for subsection (2), be regarded as remitted to the United Kingdom by virtue of the relevant event.

809VBFailure to invest within 45 daysU.K.

(1)This section applies to any portion of the income or gains to which section 809VA(2) does not apply because the investment was not made within the period mentioned in section 809VA(5) (“the 45-day period”).

(2)That portion is to be treated as not remitted to the United Kingdom to the extent that the remaining money or other property is taken offshore within the 45-day period.

(3)Where some but not all of the remaining money or other property is taken offshore within the 45-day period, the part of the income or gains to which subsection (2) applies is to be determined on a just and reasonable basis.

(4)If any remaining money or other property is taken offshore within the 45-day period, nothing in subsection (2) prevents anything subsequently done in relation to it (or anything deriving from it) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is subsequently done.

(5)A reference to the “remaining” money or other property is to so much of the money or other property brought to or received in the United Kingdom as is not used within the 45-day period to make the investment (which may in some cases be all of it).

809VCQualifying investmentsU.K.

(1)For the purposes of section 809VA, a person makes an investment if—

(a)shares in a company are issued to [F79or acquired by] the person, or

(b)the person makes a loan (secured or unsecured) to a company.

(2)The company is referred to as “the target company”.

(3)The shares or the person's rights under the loan (or both) forming the subject of the investment are referred to as “the holding”.

(4)The investment counts as a “qualifying investment” if conditions A and B are met when the investment is made.

(5)Conditions A and B are defined in sections 809VD and 809VF.

(6)A reference in this section to “shares” includes any securities.

(7)If a loan agreement authorises a company to draw down amounts of a loan over a period of time—

(a)entry into the agreement does not count for the purposes of this section as the making of a loan, but

(b)a separate loan is to be treated as made each time an amount is drawn down under the agreement.

(8)Accordingly—

(a)a separate investment is treated as made each time an amount is drawn down under the agreement, and

(b)the reference in subsection (3) to the person's rights under the loan applies only to so much of the person's rights as relate to the drawdown of that particular amount.

809VDCondition AU.K.

(1)Condition A is that the target company is—

(a)an eligible trading company,

(b)an eligible stakeholder company, F80...

[F81(ba)an eligible hybrid company, or]

(c)an eligible holding company.

(2)A company is an “eligible trading company” if—

(a)it is a private limited company,

(b)it carries on one or more commercial trades or is preparing to do so within the next [F825] years, and

(c)carrying on commercial trades is all or substantially all of what it does (or of what it is reasonably expected to do once it begins trading).

(3)A company is an “eligible stakeholder company” if—

(a)it is a private limited company,

(b)it exists wholly for the purpose of making investments in eligible trading companies (ignoring any minor or incidental purposes), and

(c)it holds one or more such investments or is preparing to do so within the next [F835] years.

[F84(3A)A company is an “eligible hybrid company” if—

(a)it is a private limited company,

(b)it is not an eligible trading company or an eligible stakeholder company,

(c)it carries on one or more commercial trades or is preparing to do so within the next 5 years,

(d)it holds one or more investments in eligible trading companies or is preparing to do so within the next 5 years, and

(e)carrying on commercial trades and making investments in eligible trading companies are all or substantially all of what it does (or of what it is reasonably expected to do once it begins operating).]

(4)The [F85references in subsections (3) and (3A)] to making investments is to be read in accordance with section 809VC.

(5)A company is an “eligible holding company” if—

(a)it is a member of an eligible trading group or of an eligible group that is reasonably expected to become an eligible trading group within the next [F865] years,

(b)an eligible trading company in the group is a 51% subsidiary of it, and

(c)if the ordinary share capital that it owns in the eligible trading company is owned indirectly, each intermediary in the series is also a member of the group.

(6)“Group” means a parent company and its 51% subsidiaries.

(7)“Parent company” means a company that—

(a)has one or more 51% subsidiaries, but

(b)is not itself a 51% subsidiary of any company.

(8)A group is an “eligible group” if the parent company and each of its 51% subsidiaries are private limited companies.

(9)A group is an “eligible trading group” if—

(a)it is an eligible group, and

(b)carrying on commercial trades is all or substantially all of what the group does (taking the activities of its members as a whole).

(10)The reference in subsection (5) to owning ordinary share capital indirectly is to be read in accordance with section 1155 of CTA 2010.

(11)A company is a “private limited company” if—

(a)it is a body corporate whose liability is limited,

(b)it is not a limited liability partnership, and

(c)none of its shares are listed on a recognised stock exchange.

809VECommercial tradesU.K.

(1)Section 809VD is to be read in accordance with this section.

(2)A reference to a “trade” also includes—

(a)anything that is treated for corporation tax purposes as if it were a trade, and

(b)a business carried on for generating income from land (as defined in section 207 of CTA 2009).

(3)A trade is a “commercial trade” if it is conducted on a commercial basis and with a view to the realisation of profits.

(4)The carrying on of activities of research and development from which it is intended that a commercial trade will be derived, or will benefit, is to be treated as the carrying on of a commercial trade.

(5)But preparing to carry on activities within subsection (4) is not to be treated as the carrying on of a commercial trade.

[F87(6)A company which is a partner in a partnership is not to be regarded as carrying on a trade carried on by the partnership.]

809VFCondition BU.K.

(1)Condition B is that no relevant person has (directly or indirectly) obtained or become entitled to obtain any related benefit, and no relevant person expects to obtain any such benefit.

(2)A “benefit”—

(a)includes the provision of anything that would not be provided to the relevant person in the ordinary course of business, or would be provided but on less favourable terms, but

(b)does not include the provision of anything provided to the relevant person in the ordinary course of business and on arm's length terms.

(3)A benefit is “related” if—

(a)it is directly or indirectly attributable to the making of the investment (whether it is obtained before or after the investment is made), or

(b)it is reasonable to assume that the benefit would not be available in the absence of the investment.

(4)For the purposes of subsection (2)—

(a)a reference to the provision of anything is to the provision of anything in money or money's worth, including property, capital, goods or services of any kind, and

(b)“provision” includes any arrangement that allows a person to enjoy or benefit from the thing in question (whether temporarily or permanently).

809VGIncome or gains treated as remitted following certain eventsU.K.

(1)Subsection (2) applies if—

(a)income or chargeable gains are treated under section 809VA(2) as not remitted to the United Kingdom as a result of a qualifying investment,

(b)a potentially chargeable event occurs after the investment is made, and

(c)the appropriate mitigation steps are not taken within the grace period allowed for each step.

(2)The affected income or gains are to be treated as having been remitted to the United Kingdom immediately after the end of the relevant grace period.

(3)Where the step required by section 809VI(2)(a) is not taken within the grace period allowed for that step, “the relevant grace period” is the grace period allowed for that step.

(4)Otherwise, “the relevant grace period” is the grace period allowed for the step required by section 809VI(1) or (2)(b).

(5)“The affected income or gains” means such portion of the income or gains mentioned in subsection (1)(a) as reflects the portion of the investment affected by the potentially chargeable event.

(6)The portion of the investment affected is—

(a)if the potentially chargeable event is a disposal of a part of the holding (or a part of the remaining holding), a portion equal to the portion of the holding (or remaining holding) being disposed of, and

(b)otherwise, the whole of the investment.

(7)Sections 809VN (order of disposals etc) and 809VO (investments made from mixed funds) make further provision for the purposes of this section.

(8)If a qualifying investment is made using the money or other property mentioned in section 809VA(3) together with other funds—

(a)that investment is to be treated as two separate investments, one made using the money or other property mentioned in section 809VA(3) and one made using the other funds, and

(b)references in the business investment provisions to “the investment” and “the holding” relate only to the investment made using the money or other property mentioned in section 809VA(3).

(9)If the potentially chargeable event mentioned in subsection (1)(b) is not the first such event to affect the investment, the income or gains mentioned in subsection (1)(a) do not include, as respects that investment—

(a)any part already treated under subsection (2) as remitted to the United Kingdom as a result of an earlier event,

(b)any part contained in amounts already taken offshore or re-invested by way of appropriate mitigation steps following an earlier event, or

(c)any part contained in amounts already used to make a tax deposit without which an amount mentioned in paragraph (b) would not have been enough to satisfy section 809VI(1) or (2)(b) (see section 809VK).

809VHMeaning of “potentially chargeable event”U.K.

(1)For the purposes of section 809VG, a “potentially chargeable event” occurs if—

(a)the target company is for the first time neither an eligible trading company nor an eligible stakeholder company [F88nor an eligible hybrid company] nor an eligible holding company,

(b)the relevant person who made the investment (“P”) disposes of all or part of the holding,

(c)the extraction of value rule is breached, or

(d)the [F895-year] start-up rule is breached.

(2)The extraction of value rule is breached if—

(a)value (in money or money's worth) is received by or for the benefit of P or another relevant person,

[F90(b)the value is received from any person in circumstances that are directly or indirectly attributable to the investment, and]

(c)the value is received other than by virtue of a disposal that is itself a potentially chargeable event.

(3)But the extraction of value rule is not breached merely because a relevant person receives value that—

(a)is treated for income tax or corporation tax purposes as the receipt of income or would be so treated if that person were liable to such tax, and

(b)is paid or provided to the person in the ordinary course of business and on arm's length terms.

F91(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)The [F925-year] start-up rule is breached if—

(a)immediately after the end of the period of [F935] years beginning with the day on which the investment was made, the target company is non-operational, or

(b)at any time after the end of that period, the target company becomes non-operational.

(6)The target company is “non-operational” at any time when—

(a)it is an eligible trading company but is not trading,

(b)it is an eligible stakeholder company but—

(i)it holds no investments in eligible trading companies, or

(ii)none of the eligible trading companies in which it holds investments is trading, F94...

[F95(ba)it is an eligible hybrid company but is not trading and—

(i)it holds no investments in eligible trading companies, or

(ii)none of the eligible trading companies in which it holds investments is trading, or]

(c)it is an eligible holding company but—

(i)the group of which it is a member is not an eligible trading group, or

(ii)none of its 51% subsidiaries in the eligible trading group of which it is a member is an eligible trading company that is trading.

(7)In subsection (6), “trading” means carrying on one or more commercial trades (including the carrying on of any activities treated under section 809VE(4) as the carrying on of a commercial trade).

(8)If consideration for a disposal of all or part of the holding is or is to be paid in instalments, the disposal is to be treated for the purposes of this section as if it were separate disposals, one for each instalment (and each giving rise to a separate potentially chargeable event).

(9)An event listed in subsection (1) does not count as a potentially chargeable event if it is due to an insolvency step taken for genuine commercial reasons (but this does not prevent the extraction of any value in connection with the insolvency step from counting as a potentially chargeable event).

(10)For the purposes of subsection (9), an insolvency step is taken if—

(a)the target company enters into administration or receivership or is wound up or dissolved,

(b)the target company is an eligible stakeholder company [F96or an eligible hybrid company] and any eligible trading company in which it holds an investment enters into administration or receivership or is wound up or dissolved,

(c)the target company is an eligible holding company and any eligible trading company in the group that is a 51% subsidiary of it enters into administration or receivership or is wound up or dissolved, or

(d)a similar step is taken in relation to a company mentioned in paragraph (a), (b) or (c) under the law of a country or territory outside the United Kingdom.

809VIThe appropriate mitigation stepsU.K.

(1)If the potentially chargeable event is a disposal of all or part of the holding, the appropriate mitigation steps are regarded as taken if the whole of the disposal proceeds have been taken offshore or re-invested.

(2)For any other case, the appropriate mitigation steps are regarded as taken if—

(a)P has disposed of the entire holding (or so much of it as P retains when the potentially chargeable event occurs), and

(b)the whole of the disposal proceeds have been taken offshore or re-invested.

(3)But if the disposal proceeds exceed X, subsections (1) and (2)(b) apply only to so much of the proceeds as is equal to X.

(4)“X” is—

(a)the sum originally invested, less

(b)so much of that sum as has, on previous occasions involving the same investment—

(i)been taken into account in determining the affected income or gains under section 809VG(2),

(ii)been taken offshore or re-invested in order to avoid the application of that section, or

(iii)been used to make a tax deposit without which the amount actually taken offshore or re-invested would not have been enough to satisfy subsection (1) or (2)(b) (see section 809VK).

(5)“The sum originally invested” means the amount of the money, or the market value of the other property, used to make the investment.

(6)Market value is to be assessed for these purposes as at the date of the relevant event (see section 809VA).

(7)Proceeds are “re-invested” if a relevant person uses them to make another qualifying investment (or the proceeds are themselves a qualifying investment) whether in the same or a different company.

(8)In cases where a breach of the extraction of value rule occurs in connection with the winding-up or dissolution of the target company—

(a)subsection (2)(a) does not apply,

(b)the reference in subsection (2)(b) to the disposal proceeds is to the value received, and

(c)references in this section and in succeeding provisions of the business investment provisions to the disposal proceeds are to be read as references to the value received.

809VJThe grace period allowed for the appropriate mitigation stepsU.K.

(1)The grace period allowed for the step mentioned in section 809VI(2)(a) is the period of 90 days beginning—

(a)if the potentially chargeable event is a breach of the extraction of value rule, with the day on which the value is received, and

(b)otherwise, with the day on which a relevant person first became aware or ought reasonably to have become aware of the potentially chargeable event.

(2)The grace period allowed for the step mentioned in section 809VI(1) and (2)(b) is the period of 45 days beginning with the day on which the disposal proceeds first became available for use by or for the benefit of P or any other relevant person.

[F97(2A)But subsection (2B) applies instead of subsections (1) and (2) where the potentially chargeable event is a breach of the 5-year start-up rule by virtue of section 809VH(5)(b).

(2B)The grace period allowed for the steps mentioned in section 809VI(2)(a) and (2)(b) is the period of 2 years beginning with the day on which a relevant person first became aware or ought reasonably to have become aware of the potentially chargeable event referred to in subsection (2A).]

(3)An officer of Revenue and Customs may agree in a particular case to extend the grace period allowed for an appropriate mitigation step in exceptional circumstances.

(4)An officer of Revenue and Customs may agree in a particular case to extend the grace period allowed for an appropriate mitigation step in circumstances specified in regulations made by the Commissioners.

(5)Regulations under subsection (4) may have effect in relation to investments made before the day on which the regulations are made.

(6)Nothing in subsection (4) or in regulations made under it limits the power conferred by subsection (3).

(7)The powers conferred on officers of Revenue and Customs by subsections (3) and (4) include power to agree to extend a grace period for a length of time that is indefinite but is capable of becoming definite by means identified in the agreement (such as the satisfaction of conditions).

809VKRetention of funds to meet CGT liabilitiesU.K.

(1)This section applies if—

(a)there is a disposal of all or part of the holding,

(b)the disposal counts as a potentially chargeable event or is part of the appropriate mitigation steps taken in consequence of a potentially chargeable event,

(c)a chargeable gain (but not a loss) accrues to P on the disposal,

(d)P is chargeable to capital gains tax (but not corporation tax) in respect of that gain, and

(e)the actual disposal proceeds are less than Y.

(2)The difference between the actual disposal proceeds and Y is referred to in this section as “the shortfall”.

(3)“The actual disposal proceeds” means the disposal proceeds but disregarding section 809Z8(4).

(4)“Y” is the sum of—

(a)the amount (if any) that would, but for this section, be required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b), and

(b)the amount found by applying the highest potential CGT rate to the amount (computed in accordance with TCGA 1992) of the chargeable gain accruing to P on the disposal.

[F98(5)The highest potential CGT rate is the highest rate specified in section 1H of TCGA 1992 (regardless of the type of the chargeable gain or, if P is an individual, the rate of income tax at which P's income is chargeable).]

(6)If this section applies, the amount that is required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b) is reduced by the permitted amount.

(7)“The permitted amount” is so much of the shortfall as is used, within the grace period allowed for taking the disposal proceeds offshore or re-investing them, to make a deposit in respect of which a certificate of tax deposit is issued to P under section 12 of the National Loans Act 1968.

(8)A reduction may not be made under subsection (6) unless—

(a)when details of the deposit are confirmed to Her Majesty's Revenue and Customs, the confirmation letter states that this section is intended to apply to the deposit, and

(b)the amount of the deposit is no greater than the shortfall.

809VLEffect of taking appropriate mitigation steps within grace periodU.K.

(1)This section explains the effect for the purposes of this Chapter in cases where section 809VG(2) does not apply because the appropriate mitigation steps were taken within the grace period allowed for each step.

(2)If disposal proceeds were taken offshore as part of those steps, nothing in section 809VA(2) prevents anything subsequently done in relation to those proceeds (or anything deriving from them) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is subsequently done.

(3)If disposal proceeds were re-invested as part of those steps—

(a)the underlying income or gains continue to be treated under section 809VA(2) as not remitted to the United Kingdom, and

(b)the business investment provisions apply to the re-investment as they apply to the original investment.

(4)In the application of the business investment provisions to the re-investment—

(a)treat the potentially chargeable event mentioned in section 809VG(1)(b) as the relevant event,

(b)treat the underlying income or gains as the income or gains treated under section 809VA(2) as not remitted to the United Kingdom as a result of the re-investment, and

(c)treat the amount used to make the re-investment as the sum originally invested.

(5)If the re-investment is made using more than the minimum amount of disposal proceeds required to satisfy section 809VI(1) or (2)(b)—

(a)that investment is to be treated as two separate investments, one made using the minimum amount of disposal proceeds and one made using the excess, and

(b)references in the business investment provisions to “the investment” and “the holding” relate only to the investment made using the minimum amount of disposal proceeds.

(6)“The underlying income or gains” means the affected income or gains (within the meaning of section 809VG) or, if one part of the disposal proceeds is taken offshore and the other part re-invested, a corresponding proportion of the affected income or gains.

(7)A further claim must be made in accordance with section 809VA in respect of the re-investment and, if no such claim is made on or before the first anniversary of the 31 January following the tax year in which the re-investment was made, section 809VG(2) applies, as respects the original investment, as if the appropriate mitigation steps had not been taken within the grace period allowed for each step.

(8)Section 809VM makes further provision in cases involving a tax deposit.

809VMCases involving tax depositsU.K.

(1)This section applies in cases where—

(a)section 809VG(2) did not apply because the appropriate mitigation steps were taken within the grace period allowed for each step,

(b)the amount required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b) had been reduced under section 809VK, and

(c)but for that reduction, the amount that was actually taken offshore or re-invested would not have been enough to satisfy section 809VI(1) or (2)(b).

(2)The tax deposit that gave rise to the reduction is referred to in this section as “the tax deposit”.

(3)Use of the tax deposit to pay the relevant tax liability does not count as remitting the underlying income or gains to the United Kingdom (and, accordingly, section 809VA(2) continues to apply to the income or gains).

(4)If any of the CTD conditions is breached, the underlying income or gains are to be treated as having been remitted to the United Kingdom immediately after the day on which the breach occurs.

(5)“The underlying income or gains” means such portion of the affected income or gains (within the meaning of section 809VG) as is—

(a)represented by the payment, in the case of subsection (3), or

(b)affected by the breach, in the case of subsection (4).

(6)The CTD conditions are as follows—

(a)the tax deposit must not be used to pay a tax liability other than the relevant tax liability,

(b)if any of the tax deposit is withdrawn by the depositor, the amount withdrawn must be taken offshore or re-invested within the period of 45 days beginning with the day on which the withdrawal was made, and

(c)any part of the tax deposit that has been neither used to pay a tax liability nor withdrawn by the due date must be withdrawn by the depositor and taken offshore or re-invested within the period of 45 days beginning with that date.

(7)Where the CTD conditions were not breached because the requisite amount was taken offshore or re-invested within the 45-day period mentioned in subsection (6)(b) or (c)—

(a)section 809VL applies to the amount taken offshore or re-invested as it applies to disposal proceeds, but

(b)read the reference in section 809VL(4)(a) to the potentially chargeable event as a reference to—

(i)the withdrawal, in a case within subsection (6)(b), and

(ii)the due date, in a case within subsection (6)(c).

(8)For the purposes of this section—

(a)“the relevant tax liability” means P's liability to capital gains tax for the tax year in which the disposal took place,

(b)“the due date” means the date by which the relevant tax liability is required to be paid,

(c)“re-invested” has the meaning given in section 809VI(7), and

(d)references to withdrawal include repayment for whatever reason.

809VNOrder of disposals etcU.K.

(1)Subsection (2) applies if at any time income or chargeable gains of an individual are treated under section 809VA as not remitted to the United Kingdom as a result of—

(a)more than one qualifying investment made in the same target company,

(b)more than one qualifying investment made in companies in the same eligible trading group, or

(c)qualifying investments made in an eligible trading company and in an eligible stakeholder company [F99or eligible hybrid company] that holds investments in that trading company.

(2)In the application of section 809VG at that time—

(a)treat the investments and holdings as if they were a single qualifying investment and a single holding, and

(b)assume that a disposal of all or part of that deemed single holding affects the deemed single investment in the order in which the qualifying investments were made (that is to say, on a first in, first out basis).

(3)Subsection (4) applies if at any time—

(a)income or chargeable gains of an individual are treated under section 809VA as not remitted to the United Kingdom as a result of one or more qualifying investments,

(b)in addition to that investment or those investments, a relevant person holds at least one other investment in the same target company, the same eligible trading group or a related eligible company, and

(c)that other investment is not a qualifying investment.

(4)In the application of section 809VG at that time—

(a)treat the investments and holdings as if they were a single investment and a single holding, and

(b)assume that a disposal of all or part of that deemed single holding is a disposal of a holding from a qualifying investment until the holdings from all the qualifying investments have been disposed of.

(5)The reference to a “related eligible company”—

(a)in relation to an eligible trading company, is to an eligible stakeholder company [F100or eligible hybrid company] that holds investments in that company, and

(b)in relation to an eligible stakeholder company [F100or eligible hybrid company], is to an eligible trading company in which that company holds investments.

(6)Subsections (2) and (4) apply whether the investments in question are held by the same relevant person or different ones.

809VOInvestments made from mixed fundsU.K.

(1)This section applies if—

(a)but for section 809VA(2), income or gains would have been remitted to the United Kingdom by virtue of a relevant event, and

(b)section 809Q (transfers from mixed funds) would have applied in determining the amount that would have been so remitted.

(2)The relevant event counts as an offshore transfer for the purposes of section 809R(4).

(3)The holding is to be treated as containing a proportion of each kind of income and capital contained in the invested property equal to the fixed proportion.

(4)“The fixed proportion” is the proportion of that kind of income or capital contained in the invested property by virtue of subsection (2).

(5)“The invested property” means the money or other property used to make the investment.

(6)Subsection (7) applies in cases where—

(a)section 809VG(2) does not apply because an amount is taken offshore, re-invested or used to make a tax deposit, or

(b)section 809VM(4) does not apply because an amount is taken offshore or re-invested.