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This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-16-2015-remittance-basis-treatment-of-foreign-income-and-gains-used-for-loan-collateral/revenue-and-customs-brief-16-2015-remittance-basis-treatment-of-foreign-income-and-gains-used-for-loan-collateral
Purpose of this brief
HM Revenue and Customs (HMRC) announcement on 4 August 2014 gave notice of the withdrawal of concessional remittance basis treatment of foreign income and gains used as collateral for certain loans brought into or used in the UK. This brief updates HMRC’s position on arrangements for loans brought into or used in the UK before 4 August 2014.
Who needs to read this?
Anyone using the remittance basis who used foreign income and gains as collateral for a loan brought into or used in the UK before 4 August 2014.
On 4 August 2014, HMRC withdrew its concessional practice published in 2010 in HMRC’s guidance manual RDRM33170 as it was seeing large numbers of arrangements not considered to be within the intended scope of the concession.
HMRC’s notice published on 4 August 2014 requested anyone using the remittance basis who used foreign income and gains as collateral for a loan brought into or used in the UK before that date to notify HMRC where they had not declared a remittance. The notice stated HMRC’s intention to assess remittances for loan arrangements that used the concession if a written undertaking was not provided by 31 December 2015 that foreign income and gains collateral would be either repaid or replaced by non-foreign income and gains collateral before 5 April 2016, or the undertaking was not honoured.
The purpose of the announcement on 4 August 2014 was to stop the concession being used in a way that was not intended, and to bring existing arrangements into line with HMRC’s application of the remittance basis to loan collateral arrangements going forward from that date.
The transitional period to 5 April 2016 was intended to provide adequate opportunity to alter all arrangements where the loan was brought into or used in the UK before 4 August 2014, ensuring there was no penalty for relying on the concession when the arrangements were set up.
Discussions with representative bodies since the announcement have brought to light that for some loan arrangements it may be difficult or impossible to unwind or replace the foreign income or gains used as collateral.
To ensure the transitional period does not have an unintended effect, after careful consideration HMRC has decided it will, with effect from today, not seek to apply the change announced on 4 August 2014 to arrangements where the loan was brought into or used in the UK before that date. From today, there is no requirement to repay or replace foreign income and gains collateral with non-foreign income and gains collateral before 5 April 2016.
The effect of the withdrawal of the concession is maintained for arrangements where the loan is brought into or used in the UK on or after 4 August 2014. This ensures HMRC’s change of practice operates as intended.
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