RDRM35840 - Remittance basis: Amounts remitted: Special mixed funds: Breaches of the deposit rule

A breach of the deposit rule occurs if a prohibited sum (see RDRM35850) is paid into the account on or after the qualifying date. A breach is remedied if within 30 days beginning with the day on which the individual became or ought reasonably to have become aware of the payment of the prohibited sum, the required amount is transferred out of the account by way of a single one-off transfer. (s809RC (1 & 2))

The required amount is an amount equal to the prohibited sum plus all other prohibited sums (if any) that have been paid in to the account since that sum was paid in.

In any 12 month period only two such breaches are permitted, if three or more breaches occur within the 12 month period then these cannot be remedied and the account will cease to be a qualifying account.

Example

Oliver disposes of some of his employment related options on 10 June 2014; at the same time, he also sells one of his collection of oil paintings. Both of the proceeds of the 2 sales are deposited into his special mixed fund account, due to an oversight.

For the purposes of the special mixed fund rules the proceeds of the oil painting are a prohibited sum. The proceeds of the option do fulfil the necessary conditions.

Oliver becomes aware of this upon receipt of his latest account statement on 7 July 2014. On 1 August 2014 the proceeds from the sale of the painting are transferred to one of Oliver’s other overseas bank accounts.

As the transfer occurred on the 26 day after he became aware of the breach and this is the first such breach occurring in 2014-2015 tax year Oliver has remedied the breach and the account retains its qualifying account status. It is within the 30 days allowed.

However as there has now been 1 breach of the deposit rules, Oliver will only be allowed 1 more such breach in the 2014-2015 tax year, before the account ceases to be a qualifying account.