Introduction Sales of Exempt Property
195.Part 3 of the Schedule introduces a new exemption for the tax which otherwise would arise on the remittance of foreign income and gains when exempt property is sold in the UK. It also treats any UK gain which arises on such sales as a foreign chargeable gain.
196.Exempt property is defined in sections 809X as property deriving wholly or partly from foreign income and gains which meets certain conditions and which would otherwise be subject to tax on the remittance basis if it were brought to the UK. Exempt property does not include property which derives wholly from capital or from UK income and gains or a combination of the two.
197.Under section 809Y(3), exempt property will cease to be exempt property where it is sold or otherwise converted into money in the UK, at which point the foreign income and gains will be taxed on the remittance basis.
198.Paragraph 18 of the Schedule introduces new sections 809YA to 809YD ITA.
199.Subsection (1) of section 809YA provides that exempt property which is sold in the UK will not be treated as a taxable remittance of foreign income and gains where conditions A to F are met.
200.Subsections (2) to (5), (7) and (9) of section 809YA set out conditions A to F for the purposes of section 809YA:
	Condition A is that the exempt property is sold to a person who is not a relevant person (as defined by section 809Z10, and having the meaning as that given in section 809M);
	Condition B is that the sale is made on arm’s length terms;
	Condition C is that no relevant person has any interest in, or entitlement to benefit from, the property after the sale has been completed, nor any conditional or unconditional right to acquire such an interest or entitlement;
	Condition D is that the entire proceeds of the sale are released on or before the final deadline (as defined in subsection 809YA(6)), whether they are paid in a series of instalments or in a single instalment;
	Condition E is that the entire sale proceeds are either taken offshore or used to make a qualifying investment under section 809VA within 45 days of the day on which the proceeds are released (as defined in subsection 809YA(10)), or, where the proceeds are paid in instalments, within 45 days of the day on which each instalment is released; and
	Condition F is that, where condition E is wholly or partly met by using the proceeds to make a qualifying investment under section 809VA, the remittance basis user must make a claim for relief under subsection 809YC(2) on or before the first anniversary of the 31 January following the tax year in which the exempt property is sold. The term ‘the remittance basis user’ is defined for the purposes of this Chapter in section 809Z10 as inserted by paragraph 16 of this Schedule as the individual who would be liable to tax on the remittance of foreign income and gains in the absence of section 809VA.
201.Subsection (6) of section 809YA defines ‘the final deadline’ for the purposes of condition D as the first anniversary of the 5 January following the tax year in which the sale takes place. This deadline is necessary to ensure that it falls within the time limit for making amendments to an individual’s self-assessment for the tax year in which the disposal takes place.
202.Subsection (8) of section 809YA provides that, where any of the sale proceeds are released within 45 days of the final deadline, condition E will be met with respect to those proceeds only where they are taken offshore or used to make a qualifying investment on or before the final deadline.
203.Example: if a part of the sale proceeds are released teo days before the final deadline, they still have to be taken offshore by the final deadline, rather than having a further 43 days to be sent offshore or re-invested, in order to meet condition E.
204.Subsection (10) of section 809YA defines when sale proceeds are ‘released’ as the day on which they first become available for use by or for the benefit of any relevant person. This is the case where the proceeds are paid in a number of instalments and where they are paid in a single instalment.
205.Subsection (11) of section 809YA provides that the exemption for sales of exempt property does not apply where such sales are made as part or as a result of a scheme whose main purpose or one of the main purposes of which is tax avoidance.
206.New section 809YB contains supplementary provisions with regard to condition E.
207.Subsection (1) of section 809YB provides that an officer of HMRC can agree to extend the time limit in which sale proceeds, including proceeds paid in separate instalments, must be taken offshore or used to make a qualifying investment in order to meet condition E.
208.Subsection (2) of section 809YB provides that the extension to the time limit stipulated in subsection 809YA(1) can be made only in exceptional circumstances and when a remittance basis user has requested such an extension.
209.New section 809YC describes the effect of disapplying section 809Y.
210.Subsection (1) of section 809YC provides that section 809YC applies where exempt property does not cease to be exempt property when it is sold, or otherwise converted into money, by virtue of section 809YA.
211.Subsection (2) of section 809YC provides that the foreign income and gains which are treated as not having been remitted to the UK under 809X will continue to be treated as not remitted to the UK after the exempt property is sold, even though that property has ceased to be exempt property as a result of that sale.
212.Subsection (3) of section 809YC provides that subsection 809YC(2) will not prevent the underlying income and gains from being treated as remitted to the UK where anything is done with any part of the sale proceeds after they have been taken offshore or used to make a qualifying investment. The underlying income and gains means part or all of the foreign income and gains which were used to purchase the exempt property.
213.Subsection (4) of section 809YC provides that the sale proceeds will be treated as containing or deriving from an amount of each kind of income and gains mentioned in the mixed fund rules in section 809Q(4)(a) to (h) which is equal to the amount of each type of those income or gains contained in the exempt property when it was brought to or received in the UK.
214.Example: an individual purchases property overseas using £2 million foreign income, £3 million foreign gains and £1 million clean capital. They subsequently bring the property to the UK where it is sold for £8 million. Under subsection 809YC(4), the sale proceeds of £8 million are treated as containing or deriving from £2 million foreign income and £3 million foreign gains. Any clean capital used to purchase the property and any UK gains arising on the sale are disregarded for these purposes.
215.Subsection (5)(a) of section 809YC provides that, where the disposal proceeds are used to make a qualifying investment, the foreign income and gains which continue to be treated as not remitted under subsection 809YC(2) will be subject to the business investment provisions in the same way as those provisions apply to income or gains which are treated as not remitted because they are used to make a qualifying investment under subsection 809VA(2).
216.Subsection (5)(b) of section 809YC provides that, where the disposal proceeds are used to make a qualifying investment, and where other amounts were also used to make the investment, only that part of the investment made using the disposal proceeds is treated as the investment for the purposes of the business investment provisions.
217.New section 809YD provides that a charge to CGT which accrues on a disposal of exempt property in the UK will be treated as a foreign chargeable gain when the sale is made in circumstances in which section 809YA applies.
218.Subsection (1) of section 809YD provides that section 809YD applies to an individual where a chargeable gain (‘the relevant UK gain’) accrues on the sale of exempt property which would, in the absence of section 809YA, be treated as remitted to the UK as a result of that sale under subsection 809Y(1). For the purposes of this section, an individual is either the person to whom the gain accrues or a person to whom part of the gain is treated as accruing by virtue of being a UK resident participator in a company resident outside the UK.
219.Subsection (2) of section 809YD treats the relevant UK gain for the purposes of the remittance basis as if it were the individual’s foreign chargeable gain. In the case of an individual who is taxed on the remittance basis without a requirement to make a claim to do so by virtue of section 809E, it also treats the relevant UK gain as it if were not part of their UK income and gains.
220.Subsection (3) of section 809YD provides that, where the individual is not domiciled in the UK and is taxed on the remittance basis in the applicable tax year, the relevant UK gain is charged as if it were a foreign chargeable gain in accordance with section 12 of TGCA.
221.Subsection (4) of section 809YD defines ‘relevant UK gain’ for the purposes of section 809YD as the gain accruing to the individual or, in the case of a person to whom part of the gain is treated as accruing by virtue of being a UK resident participator in a company resident outside the UK, as that part of the gain which is treated as accruing to him.
222.Subsection (5) of section 809YD defines ‘applicable tax year’ for the purposes of section 809YD as the year in which the relevant UK gain accrues. In cases where the gain accrues when the individual is temporarily non-resident and the gain is treated as accruing in the year in which they become resident or ordinarily resident in the UK (the ‘year of return’), it also defines ‘applicable tax year’ as that year of return.
223.Subsection (6)(a) of section 809YD provides that, in applying this Chapter to a relevant UK gain, any foreign chargeable gains which are treated as contained in the sale proceeds by virtue of subsection 809YC(4) are increased by the amount of the relevant UK gain.
224.Example: an individual purchases property overseas using £5 million of their foreign chargeable gains and £1 million clean capital which they bring to the UK. The property is sold for £7 million. The sale proceeds will be treated as containing £6 million foreign chargeable gains, made up of the £5 million gains used to purchase the property plus the £1 million relevant UK gain accruing on the sale of the property.
225.Subsection (6)(b) of section 809YD provides that, in applying this Chapter to a relevant UK gain, section 809U should be disregarded because it has no relevance to the application of section 809YD.
226.Subsection (6)(c) of section 809YD provides that, in applying this Chapter to a relevant UK gain, anything which is done in relation to any part of the sale proceeds before it is taken offshore or used to make a qualifying investment is not treated as a remittance of any of the relevant UK gain to the UK.
227.Subsection (7) of section 809YD provides that the relevant UK gain is treated as if it were a foreign chargeable gain for the purposes of the following sections of TCGA:
	section 10A (treatment of chargeable gains and losses during temporary non-residence);
	section 12 (treatment of chargeable gains and loses for those UK resident non-UK domiciled individuals to whom the remittance basis applies);
	section 14A (treatment of chargeable gains of a company treated as accruing to a UK resident participator by virtue of section 13 when that participator is a non-UK domiciled individual); and
	sections 16ZB to 16ZD (computation of remitted foreign chargeable gains).
228.Subsection (8) of section 809YD provides that section 809YD applies despite section 14A(2) TGCA, which otherwise holds that the part of the chargeable gain treated as accruing to an individual under section 12 is a foreign chargeable gain if, and only if, the asset is situated outside the UK.
229.Subsection (9) of section 809YD provides that section 809YD does not apply to a chargeable gain where an individual gives notice to HMRC.
230.Subsection (10) of section 809YD provides that a notice given under subsection 809YD(9) must be provided in writing, must identify the gain in question and must be given no later than a year after the 31 January of the year following the applicable tax year and cannot be revoked after that date.
231.Paragraph 19 of the Schedule provides that the exemption provided by paragraph 18 is available for all sales of exempt property sold on or after 6 April 2012.