Introduction Details of the Schedule
2.Part 1 inserts new section 41ZA into the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) which allows for the apportionment of general earnings between UK and non-UK duties on a just and reasonable basis. It also makes a consequential amendment to section 15 ITEPA.
3.Part 2 inserts new sections 809RA to 809RD into the Income Tax Act 2007 (ITA).
4.New section 809RA determines how the special mixed fund rules operate. New subsection 809RA(1) provides the conditions that must be met in order for these rules to apply. These are that:
	the individual must have general earnings from an employment for a tax year where some of those earnings are subject to a charge under section 15(1) and some are subject to a charge under section 26(1) ITEPA; and
	some of the earnings that are subject to section 15(1) and some that are subject to section 26(1) must be paid into a qualifying account in the tax year.
5.New subsection 809RA(2) provides the rules which apply where the conditions in new subsection 809RA(1) are met and determine the composition of transfers from a qualifying account. These treat all Condition A transfers as if they were a single transfer made from the account at the end of the tax year and treat all other transfers as a single offshore transfer which takes place immediately after the single Condition A transfer. They can then apply sections 809Q(3) and 809R(4) ITA to determine the amount of income and gains contained within those transfers.
6.New subsection 809RA(3) provides that the steps in new subsection 809RA(2) do not affect the time that those transfers from a qualifying account are considered to occur.
7.New subsections 809RA(4) and 809RA(5) provide for the application of the special mixed fund rules where they can only be used for part of a tax year, such as where the qualifying account is opened part way through a year, or where the account ceases to be a qualifying account part way through the year, unless it ceases due to a breach of the deposit rule.
8.New subsection 809RA(6) defines a ‘Condition A transfer’ for the purposes of new subsection 809RA(2) as one which is a remittance to the UK as defined in section 809L ITA.
9.New subsection 809RA(7) defines an ‘other transfer’ for the purposes of new subsection 809RA(2) as one which is not a Condition A transfer.
10.New subsections 809RA(8) and (9) provide further rules relating to other transfers.
11.New subsection 809RA(10) provides that a qualifying account is defined in sections 809RB.
12.New subsection 809RA(11) defines further terms for the purposes of new sections 809RB to 809RD. These include cross references to various sections of Chapter 1 of Part 2 ITEPA in relation to ‘employment’ and general earnings ‘for’ a tax year, and a definition of anything ‘paid into’ an account.
13.New section 809RB sets out the conditions under which an account can be a qualifying account.
14.New subsections 809RB(1) and 809RB(2) provide that an individual can nominate an account as a qualifying account provided they specify the ‘qualifying date’
15.New subsection 809RB(3) defines ‘qualifying date’ for the purpose of new subsection 809RB(2) as the first date on which sums falling within subsection (4) of more (in total) than £10 are paid into the account. This ensures that depositing a small amount in order to open a qualifying account does not automatically trigger the qualifying date.
16.New subsection 809RB(4) provides that a sum will fall within new subsection 809RB(3) if it is, or derives, from general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to that employment.
17.New subsection 809RB(5) defines a ‘relevant tax year’ as being one in which the individual has general earnings from an employment some of which fall within each of sections 15(1) and 26(1) ITEPA.
18.New subsection 809RB(6) provides for an individual to withdraw their nomination of a qualifying account, as long as the date of withdrawal is specified.
19.New subsection 809RB(7) provides that a notice to nominate or withdraw a nomination from a qualifying account must contain such information as the Commissioners for HM Revenue and Customs may reasonably require.
20.New subsection 809RB(8) specifies the relevant time limits for nominating an account to be a qualifying account or withdrawing such a nomination.
21.New subsection 809RB(9) provides the period when an account nominated by an individual will be a qualifying account. The qualifying account will cease if –
22.New subsections 809RB(10) and 809RB(11) provide restrictions on what can be nominated as a qualifying account (providing that the account must be an ordinary bank account and have a balance not exceeding £10 immediately before the qualifying date) and where an account cannot be treated as a qualifying account for the year. The latter occurs as the result of a breach of the deposit rule which is not or cannot be remedied, or where none of the individual’s earnings from an employment for the year falls within section 26(1) ITEPA.
23.New subsection 809RB(12) provides that new subsections (9)(b)(iv) and (11)(b) (which both relate to a breach of the deposit rules that is not or cannot be remedied), are to be ignored if the breach occurs after the date the qualifying account has been closed, has been denominated, or has been replaced with another qualifying account.
24.New subsections 809RB(13) and 809(14) provide that an individual can only nominate a single qualifying account at any one time, and that an account cannot be nominated as a qualifying account by more than one individual at any one time.
25.New subsection 809RB(15) defines an ‘ordinary bank account’ for the purposes of section 809RB.
26.New section 809RC provides for ‘a breach of the deposit rule’ which is defined in new subsection 809RC(1) and sets out the effects of such a breach.
27.New subsection 809RC(1) defines a breach of the deposit rule as a payment of a prohibited amount into an account.
28.New subsections 809RC(2) and 809RC(3) set out the circumstances in which a breach of the deposit rules is considered to be ‘remedied’ and the ‘required amount’ need to make the remedy. A breach of the deposit rule occurs when a ‘prohibited sum’ is paid into the individual’s qualifying account and it is remedied where the required amount is transferred out of the account within 30 days of the date on which the individual became aware or ought reasonably to have become aware that a prohibited sum had been paid into the account.
29.New subsection 809RC(4) provides for treatment of the qualifying account if a third breach of the deposit rule takes place within 12 months of the first. Where this is the case, the breach cannot be remedied and the account will be disqualified from the beginning of the tax year in which the third breach takes place.
30.New subsection 809RC(5) provides that where multiple deposits of further prohibited sums take place after the date of the first deposit of a prohibited sum, but before the required amount is paid out of the account within 30 days (and the required amount equals the amount of all the prohibited sums paid into the account before that date), they represent a single breach of the deposit rule.
31.New subsection 809RC(6) defines ‘a prohibited sum’ as any amount containing anything other than certain earnings from the individual’s employment, consideration for the disposal of certain employment-related securities or employment-related securities options, and interest on the account. Paragraph (b) provides that general earnings from an employment consisting of money and which are paid in a tax year which is a relevant tax year in relation to the employment are paid into the qualifying account will not be treated as a prohibited sum. This could include, for example, a bonus for a previous year which is paid in the current year which may be subject to neither sections 15(1) or 26(1) ITEPA, or expenses which relate entirely to employment duties falling within section 15(1) ITEPA.
32.New subsections 809RC(7) and 809RC(8) describe the circumstances in which a consideration for the disposal of employment-related securities or employment-related securities options are not a prohibited sum by reference to ‘a relevant event’, and define a relevant event for these purposes.
33.New subsection 809RC(9) defines a ‘relevant tax year’ for the purposes of section 809RC.
34.New subsection 809RC(10) defines ‘employment-related securities’ and ‘employment-related securities options’ for the purposes of section 809RC by cross-reference to provisions in ITEPA.
35.New section 809RD sets out the consequences of remedying a breach of the deposit rule within the 30-day deadline.
36.New subsections 809RD(2) provides that, where the required amount is transferred out of an account, sections 809Q and 809R will apply as if the intervening transactions had not taken place. Instead they will be treated as if they had been paid directly into whichever account the required amount was transferred into on leaving the qualifying account.
37.That transfer is treated as occurring on the date that the breach of the deposit rule took place.
38.New subsection 809RD(3) defines an intervening transaction for the purposes of new subsection 809RC(2) as a payment of a prohibited sum into an account and the single one-off transfer out of that account.
39.New subsection 809RD(4) sets out the treatment of any calculation made in respect of the single remittance to the UK and single offshore transfer at the end of a tax year (or the cessation of a qualifying account) if the breach of the deposit rule occurs before that date and the removal of the prohibited sum is made within the 30-day deadline.
40.New subsection 809RD(5) defines ‘the intervening period’ as the day on which the breach of the deposit rule occurs and the date the breach is remedied.
41.New subsection 809RD(6) provides that if more than one transfer of a sum equal to the required amount needed to remedy the breach of the deposit rule is made within the 30-day grace period, the first of these is taken to be the one-off transfer remedying the breach.
42.New subsection 809RD(7) defines ‘the 30-day grace period’.