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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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Remittance Basis: Identifying Remittances: Overview of identifying a remittance: Meaning of remittance - overview of Conditions A, B, C and D

The rules on remittances that took effect on 6 April 2008 begin defining what a remittance is at ITA07/s809L. This section introduces four ‘condition clauses’; Conditions A and B, which are taken together and Condition C and Condition D which stand alone.

Broadly, a remittance occurs when the individual, or a person linked to him or her - (a ‘relevant person’) RDRM33030 brings into the UK money or property that is, or that represents his or her foreign income or gains or property that was acquired using or otherwise ‘derives from’ those foreign income or gains.

A taxable remittance also occurs where a service is provided in the UK for the benefit of the individual or any other relevant person and the consideration for that service is met using the individual’s foreign income or gains.

There is a taxable remittance where foreign income and gains are used outside of the UK ‘in respect of’ a relevant debt, for example to repay the capital loan or to service the interest on the debt. The term ‘relevant debt’ RDRM33040 is explained below but broadly it means a debt that relates in some way to money, property or a service that would, in the absence of the debt, be a remittance of the individual’s foreign income and gains. It also applies to the servicing of debts that relate to property or the provision of services in the UK.

The rules apply both to ‘tangible’ or ‘physical’ property (including money) and to any benefit that might result from an arrangement that is entered into by or on behalf of a relevant person. The result is that the original owner of foreign income or gains is liable to UK tax where the foreign income and gains are brought to the UK or are otherwise used for the benefit of the ‘original owner’ or for the benefit of any other relevant person.

RDRM33050 gives examples of remittances to the UK, though this list is not exhaustive.

The detailed rules for each of the four conditions are explained later on in this guidance; Conditions A and B RDRM33100 are the chief rules that are likely to apply to most transactions, and you should consider these first. Condition C RDRM33200 and Condition D RDRM33400 deal with gift recipients and connected operations respectively and apply only in specific circumstances where Conditions A and B do not apply.

Even where there has been a remittance to the UK within ITA07/s809L, you may also need to consider some of the ‘exemptions’ explained in RDRM34000 to determine whether there is any tax liability arising,

Note: These Chapters use the phrase remittance of ‘foreign chargeable gains’, or refer to such gains being ‘remitted’. This phrase is used throughout as convenient shorthand, and for simplicity. In practice foreign chargeable gains will usually be part of the proceeds from the sale of an asset, which will likely be a mixed fund and both the remittances from a mixed fund and offshore transfer rules may apply (refer to RDRM35200).

In general terms, an individual’s income and chargeable gains are remitted to the UK where:

Conditions A and B

Any money or other property is brought to, received, or used in the UK by the individual taxpayer or by any other relevant person or any service is provided in the UK to or for the benefit of any relevant person

and

The property, service or consideration given for the service is, or derives from, the income or chargeable gains or foreign income or chargeable gains, or anything deriving from foreign income or chargeable gains, is used outside the UK in relation to a relevant debt.

Condition A Money/property brought to, received, or used in UK BY or FOR BENEFIT OF a relevant person RDRM33030
       
service provided      
Condition B Money, property, service, consideration for service is the income or gains    
Property, service, consideration for service is derived from the income or gains   Property or consideration is that of a relevant person  
Income or gains (or anything deriving from them) are used in respect of a relevant debt   outside of the UK  

Condition C

an individual gives property to someone other than a relevant person (a ‘gift recipient’) that is (or anything deriving from it is) either:

brought to the UK for the enjoyment of the person who made the gift or for the enjoyment of any other relevant person, or

is consideration for a service enjoyed in the UK by a relevant person, or is used outside the UK in respect of a relevant debt.

Condition C Qualifying property of gift recipient brought to, received, or used,
Qualifying property is consideration for service provided in UK FOR ENJOYMENT of a relevant person RDRM33030     
         
    Qualifying property is used in respect of a relevant debt outside the UK  

Condition D

Income or gains of an individual are given to some other person, who is not a relevant person (refer to Conditions A and B) RDRM33100 and it is not qualifying property of a gift recipient (refer to Condition C). The income or gains are given in such a way as to become that other person’s property.

There will be a remittance if the income or gains are given in relation to a ’connected operation’, as a result of which the receiving person either brings or uses their property in the UK for the enjoyment of a relevant person, or else it is used in consideration of a service provided in the UK, for the enjoyment of a relevant person, or else their property is used in respect of a relevant debt.

Condition D Property or consideration for a service of a person other than

(i) relevant person RDRM33030

(ii) qualifying property RDRM of a gift recipient

where there is a ’connected operation RDRM33440 used

in

UK FOR ENJOYMENT

of a relevant person

RDRM33030      
       
    Property is used in respect of a relevant debt where there is a ‘connected operation’ outside the UK