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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Identifying Remittances: Conditions A and B: Condition B - direct remittance of income and gains

The first part of Condition B applies if the property, service or consideration for the service is the individual’s income or chargeable gains, whether wholly or in part (ITA07/s809L(3)(a)).

So if the money/property to which the first part of Condition A RDRM33120 applies is the foreign income, albeit converted into sterling on transmission, (refer to exchange rates) RDRM31190, or if it has come from the chargeable gains it is taxable as a remittance.

Note: The examples below are designed simply to illustrate the basic principles. The examples refer to ‘remittances’ of identifiable forms of income but in practice you are may also have to consider the mixed fund rules in order to identify what has been remitted - refer to RDRM35200. Where a foreign currency bank account is used you may also need to consider foreign exchange issues - refer to RDRM33570 Foreign Currency Bank Accounts. The basic examples below do not consider these points.

Also the examples, and 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. Foreign chargeable gains will usually be part of the proceeds from the sale of an asset, which will likely be a mixed fund. You will need to refer to this Chapter together with RDRM35000 

Example 1

Petra, a remittance basis user, withdraws £400 of her foreign chargeable gains from her Spanish bank account while she is on holiday in Spain and brings it all back with her to the UK at the end of her holiday. Petra has brought money to the UK which is wholly her foreign chargeable gains, so there is a taxable remittance.

Example 2

Frederick’s wife Freda needed to purchase textbooks for her college course (refer to the earlier example). Freda uses a cash machine in Edinburgh to withdraw money from Frederick’s Austrian bank account, which contains his foreign employment income. There has been a direct remittance of Frederick’s income to the UK.

There is also a remittance if Freda uses the debit card from the Austrian bank account to purchase these textbooks from Edinburgh’s bookstores.

Also refer to RDRM35020 Conditions A and B - remittances of foreign income or chargeable gains:

Typical direct taxable remittances include:

  • cash (coins and notes) that are brought to the UK
  • an electronic transfer of funds to a UK bank account
  • a cheque drawn on a foreign bank which is used to pay a bill in the UK

For details on credit cards refer to RDRM33520 credit and debit cards.

If the service provided in the UK to which the second part of Condition A applies (refer to Condition A - provision of a service) RDRM33130 is paid for with foreign income or chargeable gains, there is a remittance.

Example 3

Johanna pays for guitar lessons for her 15 year old son Joshua, a relevant person (refer to the earlier example). Johanna pays the guitar tutor directly from her Danish bank account into his Jersey bank. Her Danish bank account contains only relevant overseas earnings.

There is a taxable remittance as the ’consideration‘ (the payment by Johanna) for the service (the guitar lessons given to Joshua, a relevant person) is Johanna’s foreign income.

Also refer to the later example under Condition B - indirect remittance of income or gains RDRM33140 and Conditions A and B RDRM35030 - remittances derived from foreign income or gains

Example 4

Francine, a remittance basis user, has some extension work done on her house in Brighton by Paulo, a specialist contractor from Spain. This is a service provided in the UK.

Francine pays half of the invoice from her French bank account, which consists entirely of her relevant foreign income. Francine pays the money to Paulo’s overseas account. The remainder of the invoice is settled by Francine using her UK employment income.

There is a taxable remittance of half of the invoiced amount which is the ’consideration’ (the payment by Francine) for the service.

Also refer to the later examples under Condition B - indirect remittance of income or gains RDRM33140and Condition B - relevant debt RDRM33040 and RDRM35020 Conditions A and B - remittances of foreign income or chargeable gains.

Example 5

Tyler, a remittance basis user, donates an amount of money to a Battersea Dogs Home, a UK charity, by making a payment direct to the charity from his US bank account which contains his relevant foreign income.

There has been a direct remittance of Tyler’s income into the UK; it does not matter that he or any other relevant person does not benefit personally from the money.

Note: Payment (using foreign income or gains) paid into any UK account, such as payments for consideration for services provided in the UK that are paid from an offshore account to the service provider’s UK account are always regarded as a remittance of ‘money or other property’ (part 1 of Condition A under ITA07/s809L(2)(a)). This is why examples 3 and 4 show the consideration being paid between two offshore accounts.

Although not applicable to either of these examples, where payments are made offshore you should refer to RDRM34040 Relevant services provided in the UK for further information about exemptions for remittances in relation to payments that are made for services that relate wholly or mainly to property situated outside of the UK.