Income Tax Act 2007 section 809VM

Cases involving tax deposits

Section 809VM deals with the tax treatment of proceeds from qualifying investment disposals where part of those proceeds have been placed into a certificate of tax deposit (CTD) to cover the capital gains tax liability, and the amount required to be sent offshore or reinvested was reduced accordingly.

• Where disposal proceeds are placed in a CTD to pay the CGT liability on a qualifying investment disposal, using that deposit to pay the relevant CGT bill does not count as remitting the underlying foreign income or gains to the UK — the original relief continues to apply.
• Strict CTD conditions must be met: the deposit must only be used to pay the relevant CGT liability; any withdrawn amounts must be taken offshore or reinvested within 45 days; and any remaining balance after the CGT payment due date must likewise be withdrawn and taken offshore or reinvested within 45 days.
• If any CTD condition is breached, the underlying foreign income or gains are treated as remitted to the UK immediately after the date of the breach, triggering a potential tax charge.
• Where the CTD conditions are met and the requisite amounts are taken offshore or reinvested within the 45-day windows, those amounts are treated as if they were disposal proceeds for the purposes of the ongoing monitoring rules in section 809VL.