INTM602240 - Transfer of assets abroad: Non-domiciled individuals: The benefits charge - transition
The provisions described in INTM602160 to INTM602200 have effect for the tax year 2008-2009 and subsequent years. There are no specific transitional arrangements for the introduction of the new provisions. However, because of the nature of the benefits charge, when making calculations for the purpose of these provisions, it will still be necessary to take account of relevant income and benefits of earlier periods. Nothing in these new provisions will alter a charge or outcome of an earlier period.
The following examples illustrate some of the points that may arise on transition.
Example 1
An ordinarily resident but non-UK domiciled individual is agreed to be potentially subject to tax under the transfer of assets benefits charge. The table below shows the income arising to persons abroad and the benefits received by the individual. The remittance basis of taxation applies for all years including 2008-2009. There are no amounts remitted to the UK in any year.
Relevant income
| Year | Date | UK income | Foreign income not received in UK | Benefits received outside UK |
|---|---|---|---|---|
| 2004-2005 | 31 Mar | 0 | £2,000 | £1,000 |
| 2005-2006 | 31 Mar | 0 | £3,000 | £1,000 |
| 2006-2007 | 31 Mar | 0 | £3,000 | £1,000 |
| 2007-2008 | 31 Mar | 0 | £4,000 | £1,000 |
| 2008-2009 | 31 Mar | 0 | £2,000 | 0 |
There is no charge under the transfer of assets regime for 2004-2005 to 2006-2007. In effect, for each of those years, benefits are ‘unmatched’ to relevant income after exclusion by ICTA88/S740(5).
In 2007-2008 applying the Steps approach a ‘chargeable amount’ of £4,000 arises. Applying ITA07/S735, that amount is reduced to £0. There is no unmatched benefit at 5 April 2008 but a pool of available relevant income of £8,000 rolling forward. For 2008-2009 there is no application of the transfer of assets benefits charge.
Example 2
An ordinarily resident but non-UK domiciled individual is agreed to be potentially subject to tax under the transfer of assets benefits charge. The table below shows the income arising to persons abroad and the benefits received by the individual. The remittance basis of taxation applies for all years including 2008-2009. There are no amounts remitted to the UK in any year.
Relevant income
| Year | Date | UK income | Foreign income not received in UK | Benefits received outside UK |
|---|---|---|---|---|
| 2004-2005 | 31 Mar | 0 | £2,000 | £1,000 |
| 2005-2006 | 31 Mar | 0 | £3,000 | £1,000 |
| 2006-2007 | 31 Mar | 0 | £3,000 | £1,000 |
| 2007-2008 | 31 Mar | 0 | 0 | 0 |
| 2008-2009 | 31 Mar | 0 | £2,000 | £1,000 |
There is no charge under the transfer of assets regime for 2004-2005 to 2006-2007. In effect, for each of those years, benefits are ‘unmatched’ to relevant income after exclusion by ICTA88/S740(5).
In 2007-2008 there is no application of the transfer of assets provisions. Applying the Steps approach for 2008-2009 there is ‘deemed income’ of £4,000. The conditions for ITA07/S735 are met and applying ITA07/S735A there is foreign deemed income to be treated as relevant foreign income of £4,000 chargeable under Part 8 ITTOIA.
Example 3
An ordinarily resident but non-UK domiciled individual is agreed to be potentially subject to tax under the transfer of assets benefits charge. The table below shows the income arising to persons abroad and the benefits received by the individual. The remittance basis of taxation applies for all years including 2008-2009. There are no amounts remitted to the UK in any year.
Relevant income
| Year | Date | UK income | Foreign income not received in UK | Benefits recevied outside UK |
|---|---|---|---|---|
| 2004-2005 | 31 Mar | 0 | £2,000 | £10,000 |
| 2005-2006 | 31 Mar | 0 | £3,000 | £1,000 |
| 2006-2007 | 31 Mar | 0 | £3,000 | £1,000 |
| 2007-2008 | 31 Mar | 0 | £4,000 | £1,000 |
| 2008-2009 | 31 Mar | 0 | £2,000 | 0 |
There is no charge under the transfer of assets regime for 2004-2005 to 2006-2007. In effect, for each of those years, benefits are ‘unmatched’ to relevant income after exclusion by ICTA88/S740(5).
In 2007-2008 applying the Steps approach a ‘chargeable amount’ of £12,000 arises, being the lesser of
- the total relevant income £12,000, and
- the total benefits £13,000 less £0 already charged.
Applying ITA07/S735, that chargeable amount is reduced to £0. There is an unmatched benefit at 5 April 2008 of £1000 to take forward but no pool of available relevant income.
For 2008-2009 there is further relevant income giving ‘deemed income’ of £1,000. The conditions for ITA07/S735 are met and applying ITA07/S735A there is foreign deemed income to be treated as relevant foreign income of £1,000 chargeable under Part 8 ITTOIA. There is unmatched available relevant income of £1,000 to take forward. There is no charge under transfer of assets benefits charge.