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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Introduction to the Remittance Basis: Transitional Provisions: Relevant persons and foreign income and gains arising to a settlement before 6 April 2008

Paragraph 86(1), (4) and (4A) Schedule 7 Finance Act 2008 and ITTOIA05/s648.


As explained in RDRM31480 ITA07/s809L has introduced the concept of ‘relevant person’RDRM33030 which, broadly, provides that a taxable remittance will occur when foreign income or gains are brought into or otherwise used in the UK by relevant persons.

Where a settlor creates a settlement and retains an interest in the property in that settlement the income arising to the trust is treated, for income tax purposes, as the income of the settlor alone under ITTOIA05/s624. This is the case even where the trust income is paid to someone other than the settlor. Refer to RDRM33590 Settlements: Chapter 5 Part 5 ITTOIA 2005.

Where a settlor claims to use the remittance basis, section 648 provides for the trust income to be treated as arising in the year in which it is remitted. Because of the narrower definition of remittance which applied before 6 April 2008 this would produce an inequitable result where relevant foreign income that arose to a settlement before 6 April 2008 is remitted and becomes chargeable on the settlor after 6 April 2008.


The transitional rule provides that in establishing whether there has been a remittance of an individual’s income and gains for 2007-08 or any earlier year Conditions A and B, Condition C and Condition D at ITA07/s809L (refer to RDRM33020 Meaning of Remittance) are applied as if references to ‘relevant person’ are to the individual.

For the purpose of applying this transitional rule only, that is, for the purpose of determining whether there is any benefit under the provisions of paragraph 86(4) only the income is treated as arising in the year that it arose to the settlement.


This means that income arising under a settlement in tax years prior to 5 April 2008 but which is remitted after 6 April 2008 is not treated as remitted by the settlor unless it has been brought to, received by or used in the UK for his benefit.