ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with practice. Change 104: Accrued income profits: relief for unremittable transfer proceeds: conditions for granting relief: section 668
This change broadens one condition and removes another condition for claims for relief in respect of unremittable income under section 723 of ICTA.
Chapter 4 of Part 8 of ITTOIA provides for relief for taxpayers taxed on income arising outside the United Kingdom, if the income cannot be remitted to the United Kingdom and certain conditions are met. This provision is the model for the relief provided by the accrued income scheme for unremittable transfer proceeds. Section 841 of that Act refers to income which cannot be remitted to the United Kingdom because of the laws of the overseas territory, any executive action of its government or the impossibility of the person obtaining transferable currency in the overseas territory.
Sections 835 to 837 of ITTOIA apply to taxpayers with income charged on the remittance basis (see section 832 of that Act). They provide that relief from tax on “relevant foreign income” (see section 830 of that Act) may be claimed if the conditions set out in section 835(2) and (3) of that Act are met.
	Subsection (2) requires that the income arose before the tax year for which relief is claimed.
	Subsection (3) requires the taxpayer to have been unable to transfer the income to the United Kingdom.
	Subsection (3)(a) to (c) requires the inability to transfer to have been due to one of three reasons:the laws of the territory where the income arose;executive action of its government; orthe impossibility of obtaining transferable currency in that territory.
Section 723 of ICTA provides a similar relief for accrued income scheme profits from transfers of securities situated outside the United Kingdom where the conditions set out in section 723(5)(a) to (c) of ICTA are met. Those conditions mirror the ones in section 835 of ITTOIA, but must be met in respect of the proceeds of the transfers.
Section 723(5)(c) of ICTA also requires that the inability to transfer is not due to any want of “reasonable endeavours” on the part of the taxpayer. (That condition was present in the source legislation for section 835 of ITTOIA, but was not reproduced in the rewritten legislation.)
Section 668(5)(c) removes the possibility of that narrow interpretation being taken. It requires there to be an inability to transfer the proceeds due to the impossibility of obtaining in the territory currency “that could be transferred to the United Kingdom”.