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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Identifying Remittances: Condition C - Gift Recipients: Remittances - enjoyment by a relevant person ignored

Incidental Enjoyment

Full Consideration given

Access by general public

A taxable remittance occurs under Condition C only where the gift recipient RDRM33230 brings to, uses or receives qualifying property RDRM33260 in the UK, or where the qualifying property is consideration for a service enjoyed in the UK by a relevant person RDRM33030. Likewise with respect to gift recipients using qualifying property in respect of a relevant debt RDRM33040 there must be enjoyment of something by or benefit to a relevant person.

Each case will depend on its particular facts, but broadly, enjoyment by a relevant person is disregarded, and so there is no taxable remittance under Condition C (if there otherwise would be) where the property or service is enjoyed by the gift recipient virtually to the entire exclusion of all relevant person, that is, the gift is genuine and any enjoyment by a relevant person is incidental (ITA2007/s809N(9)). For example a minor child may derive benefit from living in the UK with his parents in a house that was purchased using offshore funds gifted by his grandfather (a remittance basis user) to his father, for his father’s own use. It is normal for a young child to live with his parents and therefore, in most cases, no advantage over minor children generally is obtained. In this type of circumstance HMRC would generally accept that the minor child’s enjoyment of the house was merely incidental to that of his father.

Incidental Enjoyment

Example 1

James, a remittance basis user, gives his sister Julia £10,000 of his foreign income. This money is qualifying property of a gift recipient. The following year Julia brings the money to the UK to purchase a car for £10,000.

  1. James visits Julia two or three times a year and while there he occasionally uses her car to run errands. Otherwise the car is used only by Julia. Although there is enjoyment by a relevant person (James) of qualifying property (the car acquired with the foreign income), the enjoyment is marginal and may be disregarded.
  2. Although the car is registered in Julia’s name, Julia gives James the car to use every weekend and also for a long-distance journey every second month. James’ enjoyment of the car is not ‘marginal’.

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Full Consideration given

Enjoyment by a relevant person is also ignored where full consideration, in money or money’s worth, is given by a relevant person for the enjoyment (ITA2007/s809N(9)(b)).

Broadly ‘full consideration’ in this context is the amount of consideration that would be expected to be paid in a similar transaction for the enjoyment, if it was a ‘bargain at arm’s length’.

Example 2

In example 1(a) above, after a year Julia decides not to use her car anymore, and so gives it to James.

James transfers to Julia a £7,500 holiday in return which is accepted as being ‘full consideration’ in money’s worth, as the car has depreciated in worth in the intervening 12 months, and so James has not made a taxable remittance.

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Access by general public

Enjoyment is ignored if the property or service is enjoyed by a relevant person in the same manner as it may be enjoyed by the general public or a section of the general public (ITA2007/S809N(9)(c)).

Example 3

  1. Alison, a remittance basis user, purchases several first edition books in Japan for £30,000 using her relevant foreign earnings. She gives them to Katie, her god-daughter. After a few months Katie sells these books for £45,000 and purchases a set of art prints for £55,000 from a London studio. The art prints are qualifying property (up to £30,000) because they derive indirectly, and in part, from the property (the books) that Alison gave to Katie (the gift recipient).

Katie is approached by the local art gallery which is mounting an exhibition and agrees to loan them the set of prints. Alison attends the exhibition, paying a reduced entry fee at the door because she is a member of the local art institute. There is no remittance under Condition C because Alison is enjoying the property in the same manner as the general public, and on the same terms as a section of the general public (the members of the art institute).

  1. Katie loans the prints free of charge to a business run by Alison’s husband Peter, who displays them in his private office in Newcastle. Here the enjoyment by a relevant person (Peter) is not in the same way or under the same terms as the general public, so there is a taxable remittance under Condition C.