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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: Identifying Remittances: Condition C - Gift Recipients: Gift recipients - making of gift

A gift of property (this can include money) is made where an individual disposes of the property which is, or is derived from, his or her foreign income or gains

  • for no consideration
  • for consideration that is less than the full amount that would have been the due consideration if the disposal of the property was an arm’s length bargain (ITA07/s809N(5)).

These gifts of property can also include a disposal of property where

  • the individual retains an interest in the property after disposal, or
  • the individual is entitled or able to benefit from the property by some interest, right or arrangement (ITA07/s809N(6))

Example 1

Lucy, a remittance basis user, gives £5,000 of her relevant foreign income to her 12 year old godchild, Mattius, who lives in the UK. She pays it into a Jersey account set up by his parents on his behalf. Lucy has made a gift of property (£5,000 cash) to a gift recipient (Mattius) for no consideration.

In cases where consideration is given but it is less than that due from a disposal at arm’s length, the ‘gift’ element of the disposal is taken to be only that which exceeds any consideration actually given.

A disposal of property is not a ‘bargain made at arm’s length’ (ITA2007/S809N(5)(b)) when the person disposing of the property makes the disposal with the subjective intention of giving some gratuitous benefit to the other person. This test can apply to a wide range of circumstances. (Example 2)

Example 2

John, a remittance basis user, purchases a painting for £100,000 with his relevant foreign earnings. John transfers the painting to his adult daughter Sarah, a gift recipient and:

(a) receives nothing in return

Clearly John disposed of the painting for no consideration, so he has made a gift of the property to Sarah which is less than the full consideration (£100,000).   

(b) Sarah pays John £60,000 in return

John disposed of the painting for consideration (the £60,000 cash) which is less than the full consideration (£100,000) in money ‘that would be given if the disposal had been by way of a bargain made at arm's length'.   

In (b), John is regarded as having made a gift only to the extent that the property given exceeds the consideration received in return, that is £40,000 in this example.

(c) Sarah provides John with a watch in return, which has a monetary value of £5,000.

John disposed of the painting for consideration (the watch) which is less than the full consideration (£100,000) in money’s worth (£5,000) ‘that would be given if the disposal had been by way of a bargain made at arm’s length’.

In (c), John is regarded as having made a gift only to the extent that the property given exceeds the consideration received in return, that is, £95,000 in this example.

Note: This example does not consider if there are any capital gains implications on the disposal of the asset. Refer to the Capital Gains Manual for information about chargeable assets and disposals.

Example 3

Jonty, who is not and has never been resident in the UK gifts £100,000 of his earnings from his employment to Veronique, his granddaughter who is aged 20. Veronique is UK resident but not domiciled in the UK and uses the remittance basis herself.

Veronique has received a gift from her grandfather; she is also not chargeable on the gift received because it is not a remittance of her foreign income or gains.

Also, whilst the £100,000 gift has come from Jonty’s income or gains it would not be charged on him as a taxable remittance because he is not resident in the UK.