Part 14Income tax liability: miscellaneous rules
C1Chapter 1Limits on liability to income tax of non-UK residents
Limit for non-UK resident individuals, trustees etc
812AF1Temporary non-residents
1
This section applies if—
a
an individual is temporarily non-resident,
b
the individual's liability to income tax for a tax year is limited under section 811,
c
that tax year (“the non-resident year”) falls within the temporary period of non-residence, and
d
the individual's income for that tax year includes relevant investment income.
2
The total income (see Step 1 of the calculation in section 23) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount of that relevant investment income.
3
But the notional UK tax on that relevant investment income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
4
Income is “relevant investment income” if—
a
it is chargeable under Chapter 3 or 5 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies and stock dividends from UK resident companies),
b
the distributing company is a close company, and
c
the income arises or is treated as arising to the individual because the individual was at a relevant time—
i
a material participator in that company, or
ii
an associate of a material participator in the company.
5
But income within subsection (4) in the form of a cash or stock dividend is not “relevant investment income” to the extent that the dividend is paid, or the share capital is issued, in respect of post-departure trade profits.
6
“Post-departure trade profits” are—
a
trade profits of the distributing company arising in an accounting period that begins after the start of the temporary period of non-residence, and
b
so much of any trade profits of the distributing company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period.
7
The “notional UK tax” on relevant investment income is—
a
the total of any sums in respect of that income that were included within amount A in determining the limit under section 811, less
b
any credit for foreign tax paid in respect of that income that was allowed under Chapter 2 of Part 2 of TIOPA 2010 against the individual's liability to income tax for the non-resident year.
8
The following matters are to be determined on a just and reasonable basis—
a
the extent to which a dividend is paid, or share capital is issued, in respect of post-departure trade profits, and
b
the extent to which a sum included within amount A is a sum in respect of relevant investment income.
9
Nothing in any double taxation arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of this section (or as preventing a charge to that tax from arising as a result).
10
Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
a
when an individual is to be regarded as “temporarily non-resident”, and
b
what “the temporary period of non-residence”, “the year of departure” and “the period of return” mean.
11
In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“the distributing company” means the UK resident company mentioned in section 383(1) or, as the case may be, 410(1) of ITTOIA 2005;
“material participator” means a participator who has a material interest in the company, as defined in section 457 of CTA 2010;
“relevant time” means—
- a
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
- b
any time in one or more of the 3 tax years preceding that year;
- a
“trade profits of the distributing company” means the profits of any trade carried on by the distributing company, as calculated in accordance with Part 3 of CTA 2009 (trading income);
“year of return” means the tax year consisting of or including the period of return.
Pt. 14 Ch. 1 excluded by 2005 c. 5, s. 608X(3)(a) (as inserted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by Finance Act 2019 (c. 1), Sch. 3 para. 4)