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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Remittance basis: meaning of remitted to the United Kingdom: basic meaning: ITA07/S809L(2) & (3)

An individual’s chargeable gains are remitted to the United Kingdom when two conditions are met. The first condition A is that money or other property is brought to, or received or used in the United Kingdom by or for the benefit of the individual or other relevant person, or that a service is provided in the United Kingdom to or for the benefit of the individual or other relevant person.

Note that this first condition does not specify that the money or other property has to be associated with the gains in any way.

“Relevant person” is defined at ITA07/S809M and includes the individual themselves, their spouse or civil partner and their children or grandchildren under the age of 18. See the Residence, Domicile & Remittances Manual for full details.

The second condition B can be met in a number of ways:

  • The property, service or consideration for the service is, wholly or in part, the chargeable gains OR
  • The property, service or consideration derives from the chargeable gains and the property or consideration is given by a relevant person OR
  • The chargeable gains, or anything deriving from them, are used outside the United Kingdom in respect of a relevant debt.

So it is this second condition which requires there to be a link between the thing brought to the United Kingdom, or the benefit arising there, in condition A and the individual’s foreign chargeable gain.

“Relevant debt” is defined at ITA07/S809L(7) and includes debts which relate to the property or service mentioned in condition A. See the Residence, Domicile & Remittances Manual for full details.

Example 1:

Clint has claimed remittance basis in 2008-09. In that year he realises a foreign chargeable gain of £100,000 in the United States and uses the gain to buy his wife Marlene a diamond-studded clock from Tiffany’s on Fifth Avenue which she keeps with her other jewellery in their house in Berkshire. Condition A is met because property (the clock) is received or used in the UK by a relevant person (the taxpayer’s spouse). Condition B is met because the property is derived from the foreign chargeable gains. The gain has been remitted to the United Kingdom and a chargeable gain is treated as accruing to Clint when the property is received or used in the United Kingdom.

Example 2

Instead of buying the clock in the above example, Clint pays the gain to the account of an English public school with Bank of America in New York in order to meet the school fees of Clint and Marlene’s sons Clint Junior and Brad. Condition A is met because a service is provided in the United Kingdom (educational services) to or for the benefit of relevant persons (Clint’s children aged under 18). Condition B is met because consideration for that service consists of the chargeable gains. The gain has therefore been remitted to the United Kingdom and a chargeable gain is treated as accruing to Clint when the service is provided in the United Kingdom.

Note that if Clint had bought the clock in example 1 but changed his mind and instead of giving it to his wife had given it to the school to meet the fees, even if he had done so in the United States the outcome would have been the same because the consideration for the service derived from the chargeable gains and was given by a relevant person (Clint himself).

Example 3

Sujatha is a beneficiary of her deceased grandfather’s non-resident trust. She is UK resident (but not domiciled in the UK) in 2008-09 when she comes to London to take up a short-term job and the trustees provide her with a house there to live in. She claims the remittance basis in 2008-09. Chargeable gains accrue to the trustees in the same year.

The provision of the house by the trustees is a capital payment within TCGA92/S97. The capital payment in 2008-09 is matched in full to the gain (TCGA92/S2(2)) amount) accruing to the trustees and a gain is attributed to Sujatha in 2008-09 under TCGA92/S87. The section 87 gain is a foreign chargeable gain under TCGA92/S12 (TCGA92/S87B(2)). We need to consider whether the provision of accommodation in London means that Sujatha’s foreign chargeable gain (note: not the trustees’ gain) has been remitted.

The benefit of Sujatha’s use of the house is treated as deriving from her chargeable gain (TCGA92/S87B(3)). (If the trustees had given Sujatha ownership of the house, then the property itself would be treated as deriving from her gains.)

In relation to her chargeable gain, Sujatha is a relevant person and a service - the use of the house - is provided in the UK for her benefit so condition A in ITA07/S809L(2)(b) is met. We have established that her benefit derives from her chargeable gains (see above) and so condition B in ITA07/S809(3)(b)(i) is also met. Her chargeable gain is therefore remitted to the UK.