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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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HM Revenue & Customs
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Remittance Basis: Introduction to the Remittance Basis: Overview of the Remittance Basis regime: Glossary - Key definitions

Important Note on Interpretation

This glossary is intended to be used as a compilation of practical working descriptions of the terms contained in it, for those who may not be familiar with them.

It is not a list of legal definitions used by HMRC or in the legislation.

The descriptions have been drawn from a range of media, and alternative, although similar, descriptions may exist. No legal reliance may be placed on this list.

Glossary of key definitions

Arising Basis The normal, or default, basis of UK taxation for UK residents. It means that UK income and capital gains tax is due on all worldwide income and gains as they arise or accrue.
   
Connected Operation An operation which is effected with reference to a qualifying disposition RDRM33440, or with a view to enabling or facilitating a qualifying disposition.
Domicile A general law concept that connects an individual to a system of personal law in the territory in which they have their ‘permanent home’. For adults this is normally the territory in which they intend to live permanently or indefinitely. Refer to HMRC6 for further details.
Domicile is distinct from nationality and residence.    
  Exempt Property Exempt property includes, among other things: clothing, footwear, jewellery and watches purchased out of relevant foreign income (not gains) that is brought to the UK for personal use.
Any property that is brought to the UK temporarily, for repair or has a notional value of less than £1,000.    
  Foreign Chargeable Gains Chargeable gains accruing from the disposal of an asset which is situated outside the United Kingdom.
  Foreign Income Income arising from outside the UK, e.g. foreign employment income, foreign pensions.
  Foreign Securities Income This concept applies to remittance basis users only, in respect of employment-related securities income. Foreign securities income (‘FSI’) is the amount of employment-related securities income that is foreign.
As with earnings from foreign employment, the definition is slightly different for employees who are NOR and employees who are ND.    
  Foreign Specific Employment Income This term is used in the remittance basis rules to refer to any part of an individual’s employment income of a tax year that is foreign securities income.
From 6 April 2011 this includes ‘Taxable Specific Income’ when that is employment income provided through third parties.    
  Gift Recipient A person, other than a relevant person, to whom the individual makes a gift of money or other property that is income or chargeable gains of the individual, or derives from income or chargeable gains of the individual.
  Insufficient Nomination This term is not within the legislation, but has been coined by HMRC to describe the situation when an individual who is claiming the remittance basis, and is liable to pay the remittance basis charge has not nominated enough of their foreign income or gains on their SA return to produce the £30,000 charge. The remittance rules provide an ‘automatic’ additional nomination of income to ensure the charge stays at £30,000.
  Long Term UK Resident An individual who is resident in the UK in the current tax year and was also resident in at least seven of the immediately preceding nine tax years.
  Mixed Fund An offshore asset that is, represents, derives from or contains more than one type of income or capital, and/or income and capital from more than one tax year.
Special rules apply to determine the nature of remittances where there is a remittance of the whole or part of a mixed fund, or of any property derived from the mixed fund.    
  Nominated Income and Gains The foreign income or gains of a tax year that a long-term resident remittance basis user ’nominates’ and on which they will pay the income tax or capital gains tax that will constitute the remittance basis charge for that tax year. These must be reported on their Self Assessment tax return for that year.
  Ordinarily Resident Someone who is resident in the UK year after year will usually be ordinarily resident here.
Refer to HMRC6 for further details.    
  Qualifying Disposition The disposal of money or other property that is, or derives from, income or chargeable gains of the individual, to someone else in circumstances where property of that other person is somehow enjoyed by a relevant person or used to provide a service in the UK. The term is used in relation to a connected operation.
  Relevant Debt An offshore debt relating to property in the UK or the provision of a service in the UK, serviced from foreign income and/or gains.
  Relevant Person A relevant person is:
  • The individual him or herself.
  • The individual’s spouse or civil partner, or a couple living together as if they are spouse/civil partners.
  • The individual’s children or grandchildren under 18 years of age. This includes grand/children of their spouse/civil partners.
  • Trustees of a settlement, if the individual or another relevant person is a beneficiary of the trust.
  • Close companies in which a relevant person is a participator (for example a shareholder).

The above does not include all categories of relevant person. For a full definition go to ITA07/s809M.

Under the legislation, taxable remittances of an individual’s income or gains may be made by, and/or for the benefit or enjoyment of a relevant person, and this will result in a tax charge on the individual.    
  Relevant Tax Increase This term is used in relation to computing the remittance basis charge payable by long-term residents. Broadly, it is a calculation that is the difference between the total amount of:
income tax and capital gains tax payable by a long-term resident remittance basis user subject to the remittance basis charge for the relevant tax year  

less

income tax and capital gains tax that would be due from a remittance basis user if they did not have to pay tax on their nominated income and gains.                                                                                                                                                                                                                                                                                                                         | | Relevant Tax Year                    | The term is mostly used in relation to special ordering rules that may apply in certain circumstances; for example

When computing the relevant tax increase and identifying whether a nomination of income or gains is needed in a relevant tax year.

When identifying the nature and amount of a ‘transfer’ from a mixed fund. The year in which the transfer occurs is the ‘relevant tax year’.

When nominated income and/or gains are remitted. The first time the rules apply, the relevant tax year is the year in which the nominated income or gains are remitted.

The year which is the ‘relevant tax year’ in any situation will depend on which legislative provision is being considered.    
  Remittance Basis An alternative basis of taxation which can be used only by individuals who are resident in the UK but not domiciled in the UK, or individuals who are resident but not ordinarily resident in the UK.
For individuals using the remittance basis, their foreign income and foreign chargeable gains (for non-UK domiciled individuals only) are subject to UK income tax or capital gains tax only when ‘remitted’ to the UK.    
  Remittance Basis Charge An annual tax charge of £30,000 payable by UK resident individuals who claim the remittance basis, and who, in the year of claiming are:
  • aged 18 or over, and
  • have been resident in the UK for at least seven of the last nine tax years (long-term residents), and
  • have £2,000 or more un-remitted foreign income and/or gains arising/accruing in the tax year.      
      Residential Property A building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. ’Building’ includes part of a building.
Land that is or forms part of the garden or grounds of a building above, (including any building or structure on such land). This includes an interest in or right over land.    
  Transitional Provisions Rules introduced in Finance Act 2008 Schedule 7 to deal with the move from the previous legislation dealing with the remittance basis (up to and including 2007-08) to the new legislation (from 2008-09).
  Un-remittable Income This term is used at ITTOIA05/s841 and is largely relevant to taxpayers using the arising basis. It refers to any foreign income which is not able to be brought into the UK because of exchange controls, or a shortage of foreign currency in the foreign country.
It should not to be confused with the term ‘un-remitted foreign income or gains’.    
  Un-remitted Foreign Income and Gains Any foreign income or gains of a remittance basis user that arises (or accrues) during the tax year, but which remains abroad and is not brought into the UK or otherwise regarded as ‘remitted’.
These foreign income or gains may be un-remitted because, for example, the individual chooses to use or to leave the money offshore.