Paragraph 18 Temporary application of annualised basis to mixed funds containing TRF capital

after section 809R there were inserted—

“Annualised basis for mixed funds containing TRF capital

809RZZA

(1)

This section applies where, at any time in a tax year, a mixed fund contains TRF capital.

(2)

If this section applies, the composition of each transfer made from the fund in that tax year at any time is to be determined as follows—

• Step 1

  Suppose that all transfers made from the mixed fund to a TRF capital account in relation to which section 809RZA(2) applies had been a single transfer made from the fund at the end of the tax year.

  Whether that section applies in relation to transfers to a TRF capital account is determined as if all transfers from the mixed fund were made at the end of the tax year but transfers to a TRF capital account were made—

  1. (a)

     before any other transfer from the mixed fund was made, and

  2. (b)

     sequentially in the order in which the transfers to a TRF capital account were actually made.

• Step 2

  Suppose that all the condition A transfers made from the mixed fund in the tax year had been a single transfer made at the end of the tax year immediately after the single transfer mentioned in Step 1.

• Step 3

  Suppose that all the other transfers made from the account in the tax year had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in Step 2.

• Step 4

  Applying those suppositions—

  1. (a)

     find under section 809Q(3) the content of the single transfer mentioned in Step 2, and

  2. (b)

     find under section 809R(4) the content of the single offshore transfer mentioned in Step 3.

• Step 5

  Each transfer made from the fund in the tax year, other than a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1, is treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.

  “The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.

  “The relevant deemed transfer is—

  1. (a)

     if the transfer is a condition A transfer, the single transfer mentioned in Step 2, and

  2. (b)

     otherwise, the single offshore transfer mentioned in Step 3.

• Step 6

  Each transfer made from the fund in the tax year to which section 809RZA(2) is regarded as applying in accordance with Step 1 is to be treated as a transfer to which that section applies (and no other transfer in the tax year is to be regarded as a transfer in relation to which that section applies).

(3)

Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter.

(4)

A transfer from the fund is a “condition A transfer” if and to the extent that—

(a)

condition A in section 809L is met, and

(b)

either—

(i)

the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or

(ii)

the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c).

(5)

A transfer from the fund is an “other transfer” if and to the extent that it is neither a condition A transfer nor a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1.

(6)

Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year—

(a)

it is neither a condition A transfer nor a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1, and

(b)

on the basis of the best estimate that can reasonably be made at that time, it will not become either a condition A transfer or a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1.

(7)

For the purposes of Step 5 in subsection (2)—

(a)

TRF capital is to be treated as a kind of income or capital, and

(b)

TRF capital is not to be regarded as any other kind of income or capital.”, and

in section 809RZD (as inserted by paragraph 17), at the end there were inserted—

“(4)

If it is supposed under Steps 1 to 3 of section 809RZZA(2) that single transfers had been made in the intervening period, re-apply those steps in relation to those transfers taking account of subsection (2) and re-apply sections 809Q and 809R accordingly.

(5)

“The intervening period” is the period—

(a)

beginning with the day on which the breach occurred, and

(b)

ending with the day on which the single one-off qualifying transfer was made in accordance with section 809RZC(2).

(6)

If more than one qualifying transfer of a sum equal to the required amount was transferred out of the TRF capital account within the 30-day grace period, the first of those transfers is assumed to be the single one-off qualifying transfer.

(7)

“The 30-day grace period” is the period of 30 days mentioned in section 809RZC(2).”