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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 - qualifying property

Qualifying property is:

  • the money or other property that an individual gives to a gift recipient (ITA07/s809N(7)(a))
  • anything that derives, wholly or in part, directly or indirectly, from that money or other property (ITA07/s809N(7)(b)).

This includes any property or any other thing which, although it may not belong to the individual, he is enabled or entitled to benefit from by virtue of some interest, right or arrangement (ITA07/s809N(8)).

  • Any other property (see below) that is not, or is not derived from, the gifted property itself may still be qualifying property if it is

    • received in or used in the UK and is enjoyed by a 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, that is a debt that relates to other property brought to or received in or used in, or is consideration for a service enjoyed in, the UK by a relevant person

by virtue of an operation effected either

  • with reference to the property being given to the gift recipient or
  • with a view to enabling or facilitating the property to be given to the gift recipient.

‘Other property’ includes any thing which, although it may not belong to the individual, he or she is enabled or entitled to benefit from by virtue of some interest, right or arrangement (ITA07/s809N(8)).

In other words, if a gift recipient applies his or her property for the benefit of a remittance basis user because of an actual or intended gift, then that property is qualifying property (ITA07/s809(7)(c)).

Example 1(a)

In May 2015 Klimt, a remittance basis user, gives some of his foreign chargeable gains for that year to his sister Helena, a gift recipient. In October 2016 Helena transfers half of this money to the UK and gives it to Klimt’s wife.

The qualifying property here is the money that Klimt gifted to Helena. That qualifying property is used in the UK and is enjoyed by a relevant person (Klimt’s wife). The use of the gift means there is a taxable remittance on Klimt.

Example 1(b)

In May 2015 Klimt, a remittance basis user, gives some of his foreign chargeable gains for that year to his sister Helena, a gift recipient. In October 2016 Helena uses half of this money to buy a car in the UK which she makes available to Klimt’s wife to use.

The qualifying property here is the car, which derives from the money that Klimt gifted to Helena. That qualifying property is used in the UK and is enjoyed by a relevant person (Klimt’s wife). The use of the gift means there is a taxable remittance on Klimt.

Also refer to the later example in RDRM35060 Condition C - Remittances of relevant income or chargeable gains - property.

Example 2

John, a remittance basis user, gives a yacht to his sister Elaine. John had purchased the yacht using his foreign income and chargeable gains for that year. Elaine pays him 20% of the cost in cash in return. Elaine is still a gift recipient in respect of the other 80% of the cost.

  1. In October 2016 Elaine brings the boat to the UK, but it is used only by her and her husband. Qualifying property (the boat) which is derived from John’s foreign income and gains is brought to the UK, but there is no taxable remittance because neither John nor any other relevant person uses it.
  2. In December 2017 Elaine sells the boat and gives John’s two sons Pip and Harry, both UK residents, £x and £y respectively, from the proceeds. Pip is 20 years old so is not a relevant person in relation to John, but Harry is only 15. In this case the qualifying property is the £y which is derived from the boat which was itself derived from the foreign income and gains that John gifted to Elaine. The qualifying property (£y cash) is enjoyed in the UK by a relevant person (Harry) so there is a taxable remittance.

Also refer to the later example in RDRM35060 Condition C - Remittances of relevant income or chargeable gains - property.

Example 3

Linda’s husband’s family has owned a holiday house in Scotland for many years. In February 2012 Adam, a remittance basis user transfers some of his foreign income and gains to his aunt, Linda, the gift recipient, which she uses to book herself on an around-the-world cruise. Adam gives the money to Linda on the agreement that Linda will provide his wife Clare, a keen painter, with access to the Scottish property.

Several months later Linda provides Clare with an agreement saying that she can use the Scottish house, for which Clare pays nothing.

The house cannot be said to ’derive from’ the income or gains but is ‘other property’ used in the UK and enjoyed by a relevant person (Clare). As the operation which brought the house within Condition C was done with reference to the gift or to enable or facilitate the gift it is qualifying property and Condition C is met.

There is a remittance and tax is chargeable on Adam. The amount of the remittance is determined by s809P(11)(c).

Also refer to the later example in RDRM35060 Condition C - Remittances of relevant income or chargeable gains - property.

Example 4

Fraser, who is a remittance basis user, purchases some non-UK shares in January 2012, using his foreign income and gains. Fraser makes a gift of these shares to his brother, Victor, a fashion designer.

In March 2012 Victor takes out a loan with an offshore bank to purchase a designer table and chairs. Victor brings these table and chairs to the London town house that he and his brother Fraser inherited jointly from their father, and where they both now live. Fraser regularly entertains clients and friends at the house.

Victor uses some of the shares and bonds to pay off the loan.

Fraser has made a gift of property derived from his foreign income and chargeable gains (the shares) to Victor, a gift recipient. The shares are thus qualifying property of a gift recipient.

The loan taken out by Victor to purchase the furniture is a relevant debt because it relates to property (the table and chairs) brought to the UK for the benefit of a relevant person (Fraser). Fraser benefits because he lives in the house and uses the furniture.

The qualifying property (the shares) of Victor (a gift recipient) is used outside the UK in respect of this relevant debt. There is a remittance under Condition C.