ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change has no implications for the amount of tax paid, who pays it or when. It affects (in principle but not in practice) only administrative matters. Change 115: Transactions in land and sales of income from occupation: application to non-UK residents: sections 756, 759 and 778
This change is about the omission of provisions which might suggest that the normal rule that non-UK residents are not liable for income tax when the source of the income is outside the United Kingdom does not apply in the case of the charges under sections 775 and 776 of ICTA.
Section 775(9) of ICTA (sales of income from occupation: territorial scope) provides:
“This section shall apply to all persons, whether resident in the United Kingdom or not, if the occupation of the individual is carried on wholly or partly in the United Kingdom.”
Section 776(14) of ICTA (transactions in land: territorial scope) similarly reads:
“This section shall apply to all persons, whether resident in the United Kingdom or not, if all or any part of the land in question is situated in the United Kingdom.”
These provisions derive from paragraph 7(1) and (2) respectively of Schedule 16 to FA 1969.
It is unclear to what extent section 776 of ICTA applies to a non-UK resident who disposes of several areas of land, some within the United Kingdom and some outside the United Kingdom, under a single transaction if the statutory conditions for liability under section 776 are met. Similarly, it is unclear to what extent section 775 of ICTA applies to a non-UK resident who carries on an occupation partly within and partly outside the United Kingdom and enters into a transaction within section 775.
Section 827A(3) of ICTA provides that an amount arising to a non-UK resident is chargeable to income tax only if it is from a source in the United Kingdom. This would mean that the non-UK resident would only be chargeable on the gain attributable to the land situated, or on the capital amount attributable to the occupation carried on, in the United Kingdom.
But section 827A(5) of ICTA provides that section 827A is subject to any express or implied provision to the contrary in any provision of the Income Tax Acts. It could be argued that sections 775(9) and 776(14) of ICTA each show a contrary intention to the general rule in section 827A(3) and that therefore in such a case the whole of the gain would be chargeable.
In practice, HMRC do not regard any such contrary intention as being shown. Sections 759 and 776 of this Act follow that interpretation and so do not rewrite the part of sections 775(9) and 776(14) about residence. This omission is considered to be a change in the law, as it will prevent HMRC from arguing for the other interpretation.