Settlements: anti-avoidance etc

Finance (No. 2) Bill – in a Public Bill Committee am 10:00 am ar 16 Ionawr 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Amendment 62, in schedule 10, page 142, line 40, at end insert

“87Q Review of taxation of capital payments received from a settlement

(1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer must review the effects of the changes to this Chapter made by Schedule 10 to that Act.

(2) The review under this section must consider the effects of those changes on—

(a) the taxation regime for settlements, and

(b) anti-avoidance measures for settlements.

(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”

This amendment requires the Chancellor of the Exchequer to review the effects of changes to TCGA 1992 made by the Bill in relation to the taxation of capital payments received from a settlement.

Amendment 63, in schedule 10, page 142, line 40, at end insert

“87Q Public register of capital payments received from settlements

(1) The Chancellor of the Exchequer must by regulations establish a register of capital payments received from settlements to which this Chapter applies within 12 months of the passing of the Finance Act 2018.

(2) A register established under subsection (1) shall record in relation to capital payments—

(a) the recipient beneficiary;

(b) the settlor; and

(c) the trustees of the settlement from which the capital payment is received.

(3) That part of the register containing information in paragraph (c) shall be made available to the public.”

(1A) In section 98(1), after “87”, insert “, 87Q”.”

This amendment creates an obligation for the Chancellor of the Exchequer to create a public register of trust beneficiaries, settlors, and trustees. It also amends section 98(1) of TCGA 1992 to expand, to include new section 87Q, the existing power for HMRC to require any person to provide information as they think necessary to fulfil certain sections of that Act.

Government amendments 2, 51 and 52, 5 to 27, 53, and 28 to 32.

That schedule 10 be the Tenth schedule to the Bill.

The short answer is no, because the clause stand part debate is the lead item on the agenda.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

I should have known that you were several steps ahead of me, Sir Roger. I totally understand and will therefore speak to the clause.

Clause 35 seeks to safeguard the integrity of our tax system by ensuring that it is not possible for an individual with an offshore trust to avoid paying UK tax on payments from that trust. The UK already has extensive anti-avoidance legislation in place to prevent individuals who hold offshore trusts from being able to avoid paying income tax or capital gains tax on the gains from those settlements. The UK’s far-reaching anti-avoidance rules mean that a UK-domiciled individual who sets up an offshore trust will pay tax on income and gains in that trust as they arise if they have any entitlement to the trust income or the underlying assets. That means that using an offshore trust does not deliver any tax advantage for most people living in the United Kingdom.

However, there are a small number of people who set up or benefit from an offshore trust, where tax is not due on income and gains as they arise in the trust; instead, tax is charged when moneys or benefits are taken from the trust. Typically these people are foreign domiciliaries—often referred to as non-doms—although there will be certain circumstances in which UK domiciles pay tax only when moneys or benefits are withdrawn, such as when the individual who set up the trust has died.

Where tax is charged on money or benefits taken from the trust, it is important that the legislation is effective in imposing a tax charge on the money or the benefit that is taken. However, a number of loopholes in these rules allow trustees to plan their arrangements carefully so that the beneficiary can obtain money or benefits without paying UK tax. I do not think that our tax system should allow people to live in the UK and not pay their fair share, and the Government, through this clause, are taking significant action against this contrived tax planning.

The first loophole removed by clause 35 concerns the way capital gains that accrue to offshore trusts are attributed to trust beneficiaries. Currently, UK resident beneficiaries are taxed when they receive a capital payment that results from the capital gain in the trust. However, UK beneficiaries can avoid tax on sums received from the trust if there are other beneficiaries of the trust and the trustees carefully plan how payments are made. This is because the current rules allow payments made to a beneficiary who is not UK-resident to be set against the gain that is taxed when later payments are made to UK residents. In some cases, this can mean that payments to UK beneficiaries are not taxed at all. Clause 35 stops this by no longer allowing payments made to non-residents to be treated as having been made from the trust’s capital gains. A similar rule already exists for trust income.

The second change deals with a capital gains tax loophole where an offshore trust makes capital payments to a close family member of the UK resident who set up the trust. Under the current rules, the fact that the payment is not directly given to the individual would mean they avoid any UK tax due on the payment or benefit from the trust. The new rules close this opportunity by treating such payments as if they were made directly to the UK resident who set up the trust, who will pay tax on the payment or benefit as if they had received it directly.

The third loophole that this clause closes is when a capital payment is made as part of an arrangement that routes the payment through a third party. Under the arrangement, the third party who receives the payment or benefit from the trust makes an onward gift of the sum received to the intended beneficiary. As things stand, this can enable the ultimate beneficiary to avoid paying tax on the payment or benefit as they should have done if made to them directly. The changes to the rules will prevent such arrangements from being effective for tax purposes by taxing the recipient of the gift as if the capital payment was made directly from the trust to them in the first instance. These rules apply if the recipient is resident in the United Kingdom, but it means that they are not able to avoid paying UK tax on income and gains made by the trust simply by routing payments through a third party.

Minor Government amendments to schedule 10— Government amendments 2, 5 to 32, and 51 to 53—amend new provisions in the Income Tax (Trading and Other Income) Act 2005 to ensure that they work as intended. The amendments clarify that the provisions apply to both capital and income benefits and ensure that they will not result in income tax charges on non-UK resident beneficiaries. These amendments also ensure that no double tax charges arise and clarify how items will be deducted in respect of earlier charges under either the settlements benefits code or the transfer of assets code.

I will now turn to the Opposition amendments. Amendment 63 proposes the creation of a register of trust beneficiaries, settlors and trustees, with the register of trustees being public. I do not think there is any need to create a new register. From 26 June last year, any trust that generates a UK tax liability, regardless of where it is established, is required to register with HMRC. Trustees are required to provide detailed information about the trustees, settlors, beneficiaries and trust assets. This information is accessible to HMRC and law enforcement authorities, enabling them to draw connections between parties associated with relevant trusts. For compliance purposes, HMRC has the information it requires. The Government also believe strongly in taxpayer confidentiality. Making this register public would jeopardise that principle and it is something to which the Government cannot agree. In addition, HMRC already publishes data on a number of trusts with an income tax and/or capital gains tax liability during the year.

Amendment 62 seeks to introduce a review within six months of the date of this Bill being passed to consider the effects of the changes to the schedule, particularly the effects on tax avoidance in trusts. This clause is explicitly directed at reducing tax avoidance through trusts. It is legislation that has been consulted upon, having been published in draft in September, and the Government are confident that it will close the loopholes it targets. I therefore ask the Opposition not to press the amendment. I commend the clause and the Government’s amendments to the Committee.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 10:15, 16 Ionawr 2018

I will speak to both of our amendments, if that is acceptable to the Committee. I am grateful to the Minister for his introduction. As colleagues will know, these measures attempt to close loopholes within the Government’s new non-dom regime. From an Opposition point of view, this is rather frustrating, because we were concerned about many of these issues, particularly the exemption of offshore trusts from the non-dom regime. We are pleased that there has been some tightening, but of course we would like to see more.

We see in these measures new anti-avoidance provisions so that, as was mentioned, it will no longer be possible to wash out trust gains by payments to non-residents. On capital payments made to a close family member of a UK resident, there will capital gains tax and income tax. Where a non-resident beneficiary receives a distribution from a trust and then makes an onward gift of all or part of it, directly or indirectly, to a UK resident, the original payment will be taxed as if received by that UK recipient. Surely that is right and correct.

Although these measures, in and of themselves, do provide some sticking plaster, they do not fundamentally reform the non-dom regime in the manner we would wish to see. I should qualify that by stating that the submission to the Committee by the Institute of Chartered Accountants maintains that the Government’s promises are essentially greater than what they are delivering, even within their own terms. It maintains that the Government’s indication that the inadvertent remittance trap has been closed is not, in practice, fulfilled by these measures, and that such a trap could be continued. It would be helpful to hear the Minister’s assessment of whether the institute is correct in that regard.

We debated the overall provisions on non-doms at length when considering the previous Finance Bill, so I will not rehearse all the arguments now. We are talking about the 121,000 individuals who claimed non-dom status in 2014-15. Non-domiciled UK resident taxpayers account for about 85,000 of those people; the remaining 35,000 or so are non-UK residents. Obviously, those non-doms are still subject to different taxation arrangements from UK residents. That is a fundamental principle of difference, even though, yes, the Government have made changes. Again, I will not rehearse all the previous arguments.

Even the Government’s changes enable people, if they so wish, to have a 15-year wait before triggering the new arrangements, because they have to have been resident in the UK for 15 of the past 20 years in order to be considered UK domiciled and for their status to be changed. We do not feel that those arrangements are strict enough.

We are focusing on the use by some non-doms—obviously, for many people it is a legitimate status—of offshore tax arrangements, particularly trusts. It would be helpful to hear from the Minister about the extent of existing abuse that these measures attempt to deal with. Have the measures arisen because of experience with disclosure of tax-avoidance schemes, for example? If so, can he provide us with some evidence on that? Or have they arisen from cases that HMRC has settled out of court? It would be helpful to understand the magnitude of the problem before considering mechanisms to try to deal with it.

More generally, taxing trusts is a difficult challenge. In public policy terms, there are obviously no simple solutions. Trusts often raise issues relating to capital gains tax, inheritance tax and many other matters. I understand that in November the Government committed themselves to a large programme of activity—or at least a programme of activity—on trust simplification. It would be helpful to hear from the Minister what exactly has moved in that regard.

The Institute of Chartered Accountants has said that it would be willing to participate in that programme of activity, as I know would many other stakeholders. It would be useful to know how far that activity has progressed, because there are many calls for a fundamental overhaul in our approach to trusts, and we also need to change how we deal with offshore trusts. That is particularly the case with evidence of abuse, but not sufficiently systematic evidence; as I mentioned before, we need more of it. We have already discussed in the House Deutsche Bank’s use of trusts to enable bankers to dodge income tax on bonuses. HMRC managed to defeat that scheme, but there are other schemes in use today. Again, concerns about HMRC’s capacity might arise when we are talking about very complex tax matters.

To be clear, Labour opposed the exclusion of offshore trusts from non-doms rules in the first place, and we have made that point consistently. We made it in the debate on the ways and means resolutions for the previous Finance Bill, and then again on Second Reading and in the Public Bill Committee. We still think that exclusion is inappropriate, particularly given the generalised lack of transparency on trusts. We have already referred to the discussions that the Government are having with our Crown dependencies and overseas territories. I know that part of those discussions have been about the creation of registers of beneficial ownership—so far just for companies. That has not yet been fully fulfilled for some of those jurisdictions, but in any case it does not extend to trusts, and we believe that it should. It would be interesting to hear about any progress on that.

Labour is also calling for a public register of UK trusts. Our amendment seeks more transparency on the use of offshore trusts, at least as a start. I am sure that the Minister will mention concerns about the confidentiality of those using trusts, which always seems to be the response when we raise the issue. I have huge faith in the British civil service and think that it is very good at creating appropriately targeted regimes. If we look at how Companies House has developed its system for registration and transparency on company ownership and operation, we see that there is already a mechanism within the regime to prevent inappropriate disclosure that could damage those involved with a company. For example, if we were talking about a firm that breeds beagles for animal experimentation, which could be targeted by animal rights activists or extremists, providing its address could be inappropriate, so it is possible for Companies House to have a different disclosure regime for that company. We could create a similar arrangement for trusts. Surely that would be possible and appropriate.

The British Government will have to come to a position on this because of a matter that I have raised previously: the EU now has an agreement to have transparency for business-like trusts. The devil is in the detail, of course, because we could see gaming around what is then deemed to be business-like, as opposed to other types of trusts. I think that a regime that just excludes those trusts from full transparency where there could be harm to the beneficiaries would be more appropriate. None the less, that is what the EU is moving towards. It would therefore be helpful to know exactly what the Government’s position is on the matter. That would offer a halfway house to much fuller transparency.

We are trying to get at the matter through a side door in our amendment, but we are going to keep pushing this argument for more transparency on trusts, which we think is absolutely essential. In the debate in the House on some of these matters and on the Paradise papers, I remember certain Government Members using an analogy for offshore trusts, stating that they were very similar to ISAs—surely they are exactly similar. I always use the “neighbour test.” I think, “What would my neighbour think?” If I asked her, “Is it okay for you to have an ISA?”, she would say, “If I had enough money, yes I would like to, if I could.” The exact intentions of an ISA are clear within its provisions: they are meant to promote savings. That is the whole point of them.

However, as far as I can see there is no legislation that promotes individuals undertaking trusts specifically as a means of tax avoidance—that is not the stated intention of any piece of legislation, as distinct from the stated intention of ISAs. Therefore, the analogy is inappropriate. We will continue to push for the need for greater transparency in this area.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader, Shadow SNP Spokesperson (Economy) 10:30, 16 Ionawr 2018

It is a pleasure to be here. I am continually impressed by the breadth and depth of knowledge displayed by the hon. Member for Oxford East, who has been a brilliant addition to the shadow Front-Bench team; I am pleased to be taking part in so many meetings at which she speaks.

The Minister has written a letter to the Chair, stating:

“I have tabled three minor amendments to clause 35. They replace amendments 3 and 4 already tabled which are withdrawn and make sure the schedule works as intended. They are in response to expert stakeholder feedback. The concern about amendment 3 was that it had unintentionally switched off the onward payment rule”— which does not sound like a good thing—

“and also that amendment 4 had contained an incorrect cross-reference.”

These have been changed because of expert stakeholder feedback. Given the discussion we had last week, if we had taken evidence from expert stakeholders, the Government might not have had to make those changes at this late stage. The next time we have a Finance Bill, I would appreciate it if the Government considered having that evidence session in advance of the Public Bill Committee stage, not in advance of consideration by Committee of the whole House, as generally we are discussing the less technical matters at that stage. These are incredibly technical matters, and the Government have clearly made a couple of mistakes in their amendments. They might not have done so had we heard the expert evidence and been able to ask questions at that stage. I support the Opposition amendments and urge the Minister to respond to my concerns.

I will allow the hon. Lady to make that point, although it is strictly out of order. I am sure that it has been taken.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

May I echo the generous observations made by the hon. Member for Aberdeen North about the hon. Member for Oxford East, who is extremely thorough, well-read and well-versed in the matters we discuss in Committee, adding a great deal to the quality of the debate and the scrutiny of the Bill.

I was pleased that the hon. Member for Oxford East welcomed the tightening that we are introducing on this aspect of anti-avoidance. She stated that she would like to see more of it, if that is necessary, and referred to the ICAEW’s comments in that respect. We must always bear in mind that there is inevitably a certain capacity within Government to set out legislation wherever we come across further improvements that could be made or loopholes that could be tightened up, but there is an army of creative, knowledgeable and determined individuals who set out to undo what we put in place, so all Governments will probably always be in the business of tracking down and closing loopholes as they become evident. I can assure her that the Treasury and I intend to be vigorous in stamping out tax avoidance and evasion. It is entirely unfair on those who rightly pay their fair share of tax, it is damaging to our public services, and we will not tolerate it.

The hon. Member for Oxford East raised various concerns about the non-doms regime, some of which reprised our debates on the previous Finance Bill. She might not be satisfied with the current arrangements pertaining to the taxation of non-domiciled individuals, but they are tighter than was the case under previous Labour Governments, when the remittance basis came in. She referred to the different bases on which different people are taxed—that was certainly a feature under the Labour Government. As we have argued many times, we have to make a balance between having a robust regime that is fair to the taxpayer and making sure that the investment that certain individuals bring to this country is not unduly jeopardised.

The hon. Member for Oxford East asked specifically what discussions we may have been having with the Crown dependencies and overseas territories—recognising, as she does, the advances we have made on access to information about companies and their affairs, which is real-time access for HMRC. We have of course been at the forefront of the common reporting standards regime. She asked specifically about trusts. From the UK’s tax perspective, the trusts that are relevant are those that have a UK tax interest associated with them. We have already brought into law provisions that set up exactly that register, which is accessible by HMRC. There is a duty on those trusts where such an interest is a part of the operation of the trusts for them to be disclosed in that manner. She asked what actions might be taken to simplify the taxation of trusts and referred to the ICAEW’s points on that. She might be aware that there is an ongoing consultation, the results of which will be published later this year. I am certainly happy to keep her informed as that progresses.

The hon. Member for Aberdeen North did indeed go slightly beyond the scope of the Bill, so perhaps I might be allowed similar latitude in responding to the important points she raised. She is right that amendment 3, as originally drafted, would have switched off the elements of the Bill that clamped down on the onward gifting of moneys and capital from trusts, and I fully accept that that was an unfortunate error. She contends that it is just the kind of error that might have been spotted earlier had we had an evidence session as part of the Finance Bill process. However, that error shows how these highly granular, technical, line-by-line issues, by their very nature, are probably best handled not in a broad Committee evidence session, but through consultation on the draft legislation. Particularly as we move to a single fiscal event, where we will have a more measured build-up to Finance Bills, the Treasury’s aim will be to ensure that we get as much of the Bill in draft out there, so that organisations, accountants and others can pore over these clauses line by line. On the general point about evidence sessions, as we have discussed before, it would be for the usual channels to agree those. I am sure that she will be making those representations to her Whips’ offices.

Question put and agreed to.

Clause 35 accordingly ordered to stand part of the Bill.

Amendment proposed: 62, in schedule 10, page 142, line 40, at end insert—

“87Q Review of taxation of capital payments received from a settlement

(1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer must review the effects of the changes to this Chapter made by Schedule 10 to that Act.

(2) The review under this section must consider the effects of those changes on—

(a) the taxation regime for settlements, and

(b) anti-avoidance measures for settlements.

(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”—

This amendment requires the Chancellor of the Exchequer to review the effects of changes to TCGA 1992 made by the Bill in relation to the taxation of capital payments received from a settlement.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Rhif adran 7 Caledonian Pinewood Forest — Settlements: anti-avoidance etc

Ie: 9 MPs

Na: 10 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Amendment proposed: 63, in schedule 10, page 142, line 40, at end insert—

“87Q Public register of capital payments received from settlements

(1) The Chancellor of the Exchequer must by regulations establish a register of capital payments received from settlements to which this Chapter applies within 12 months of the passing of the Finance Act 2018.

(2) A register established under subsection (1) shall record in relation to capital payments—

(a) the recipient beneficiary;

(b) the settlor; and

(c) the trustees of the settlement from which the capital payment is received.

(3) That part of the register containing information in paragraph (c) shall be made available to the public.”

(1A) In section 98(1), after “87”, insert “, 87Q”.”—

This amendment creates an obligation for the Chancellor of the Exchequer to create a public register of trust beneficiaries, settlors, and trustees. It also amends section 98(1) of TCGA 1992 to expand, to include new section 87Q, the existing power for HMRC to require any person to provide information as they think necessary to fulfil certain sections of that Act.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Rhif adran 8 Caledonian Pinewood Forest — Settlements: anti-avoidance etc

Ie: 9 MPs

Na: 10 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Amendments made: 2, in schedule 10, page 146, line 7, after “is” insert

“—

(a) where the individual is UK resident for the year,”

Amendment 51, in schedule 10, page 146, line 9, at end insert

“, 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).”

Amendment 52, in schedule 10, page 146, line 33, leave out from “purposes” to second “for” in line 34 and insert

“as income of the settlor for the year and, in a case within paragraph (b), not as income of the individual”.

Amendment 5, schedule 10, page 147, line 4, at end insert—

“(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).”

Amendment 6, in schedule 10, page 148, line 4, at end insert—

“(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.”

Amendment 7, in schedule 10, page 148, leave out lines 14 to 18 and insert—

“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),”.

Amendment 8, in schedule 10, page 148, line 25, leave out “all amounts which” and insert

“so much of PFSI as is”.

Amendment 9, in schedule 10, page 148, line 26, leave out “are”.

Amendment 10, in schedule 10, page 148, line 29, leave out “all amounts which” and insert

“so much of PFSI as is”.

Amendment 11, in schedule 10, page 148, line 30, leave out “are”.

Amendment 12, in schedule 10, page 149, line 33, leave out “available”.

Amendment 13, in schedule 10, page 149, leave out lines 37 to 40.

Amendment 14, in schedule 10, page 149, line 41, at end insert—

‘(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.’

Amendment 15, in schedule 10, page 149, line 43, leave out “subsection (2)” and insert “this section”.

Amendment 16, in schedule 10, page 150, line 2, leave out from “settlement,” to end of line 7 and insert

‘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.’

Amendment 17, in schedule 10,  page 150, line 10, after first “the” insert “relevant”.

Amendment 18, in schedule 10, page 150, line 16, leave out “available”.

Amendment 19, in schedule 10, page 150, line 17, at end insert—

“(ca) 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,

(cb) 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,”.

Amendment 20, in schedule 10, page 150, line 18, leave out

“643A as arising to the”

and insert

“643A(1) (before the application of section 643A(3) and (4)) as arising to the relevant”.

Amendment 21, in schedule 10, page 150, line 19, after “benefits” insert

“referred to in paragraph (a)”.

Amendment 22, in schedule 10, page 150, line 23, after “benefits” insert

“referred to in paragraph (a)”.

Amendment 23, in schedule 10, page 150, line 24, leave out “available”.

Amendment 24, in schedule 10, page 150, line 25, leave out second “the” and insert “those”.

Amendment 25, in schedule 10, page 150, line 26, leave out “available”.

Amendment 26, in schedule 10, page 150, line 27, at end insert—

“(3) For the purposes of subsection (2)(ca), the whole or part of an item of the protected income is to be treated as taken into account in respect of a benefit so far as the item or part—

(a) is matched under section 735A of ITA 2007 with notional income with which the benefit is matched under that section, or

(b) would be matched under that section (if it applied also for this purpose) with notional income with which the benefit would be matched under that section (if it applied also for this purpose),

and here “notional income” means income which is treated as arising under section 732 of ITA 2007.”

Amendment 27, in schedule 10, page 150, line 47, leave out “643A(1),” and insert “643A(1)(a),”.

Amendment 53, in schedule 10, page 151, line 7, at end insert

“or

(iii) is treated by section 643A(1)(b), before the application of section 643A(3) and (4), as income of an individual (“the original beneficiary”) for a tax year (“the matching year”) but is not treated by section 643A(3), and is not treated by section 643A(4), as income of the settlor for the matching year,”.

Amendment 28, in schedule 10, page 152, leave out lines 10 to 19 and insert—

“(2) Where, in a case within subsection (1)(a)(i) and by reference to the amount mentioned in subsection (1)(a), income is treated by section 643J or 643L as arising to a person for a tax year, the original beneficiary is not liable to tax for any later tax year on so much of the amount mentioned in subsection (1)(a) as is equal to that income; and where, in a case within subsection (1)(a)(ii) and by reference to the amount mentioned in subsection (1)(a), income is treated by section 643J as arising to a person for a tax year, the settlor is not liable to tax for any later tax year on so much of the amount mentioned in subsection (1)(a) as is equal to that income.”

Amendment 29, in schedule 10, page 154, line 38, leave out “643A(1)” and insert—

“643A(1)(a), both before and after the application of section 643A(3) and (4),”.

Amendment 30, in schedule 10, page 156, line 40, at end insert—

“(ca) the original recipient is not taxed on the original benefit (see subsection (6A)),”.

Amendment 31, in schedule 10, page 158, line 15, at end insert—

“(6A) For the purposes of subsection (1)(ca), the original recipient is taxed on the original benefit if the original recipient is liable to income tax, or capital gains tax, by reference to the amount or value of the original benefit; and where the original recipient is so liable by reference to the amount or value of part only of the original benefit, this section applies as if the two parts of the original benefit were separate benefits.”

Amendment 32, in schedule 10, page 158, line 21, at end insert—

“and see also section 643B(4) to (7) (interpretation of references to provision of benefits by trustees).”—

Schedule 10, as amended, agreed to.

Clause 36