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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Introduction to the Remittance Basis: Transitional Provisions: Relevant foreign income and offshore loans - Example 2

Charles is a UK resident remittance basis user and has lived in the UK for several years. He has an existing mortgage that was taken out in 2005 with a non-UK bank that is secured on a house in the UK in which Charles, his wife and children all live. Charles pays interest on the loan out of his untaxed relevant foreign income.

The existing mortgage facility includes an open credit facility that allows Charles to borrow (draw-down) additional funds. On 15 March 2008 Charles uses the credit facility to borrow a further amount of £100,000 that he intends to use to buy an additional interest in his residential property. The terms and conditions of the original loan facility apply to the further draw-down.

The draw down of additional funds after 12 March 2008 represents a further advance of the mortgage under the original terms, so it is not regarded as ‘another debt’ secured on the property. It is a ‘relevant debt’ for the purposes of s809L.

However, only money that has been lent before 12 March 2008 qualifies under the terms of FA2008/para 90.

Only the relevant percentage amount of the interest payments that must be made by Charles that are in relation to the part of the loan received before 11 March 2008 are eligible for exemption from tax.