Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
, see all updates

Remittance Basis: Identifying Remittances: Condition C - Gift Recipients: Gift recipients - transitional provisions in relation to receipt of gift

In relation to income and gains for 2007-08 and earlier tax years (pre 6 April 2008 foreign income or gains), certain transitional provisions in Finance Act 2008 mean that references in the legislation to a relevant person are, in effect, replaced by references to the individual taxpayer.

The two provisions work together to limit the scope of ‘relevant persons’ RDRM33030 in the appropriate circumstances.

Paragraph 86(4) Finance Act 2008

This transitional provision means that where pre 6 April 2008 foreign income or gains are involved, references in Condition C (ITA07/s809L(4) only applies if qualifying property RDRM33260 is brought to, received or used in the UK, or a service is enjoyed in the UK by the individual him or herself.

Example 1

In July 2010 Frank, a remittance basis user, makes a gift of £3,000 of his relevant foreign earnings for the tax year 2006-07 to his nephew, Jonni. In September 2011 Jonni brings the £3,000 to the UK and pays £1,500 of the money to Frank’s 15-year old grand-daughter Molly.

Under Condition C this would usually be regarded as a taxable remittance because a gift recipient RDRM33230(Jonni) has brought qualifying property (the £3,000) to the UK and it is enjoyed by a relevant person (Molly).

However, because Frank’s gift of relevant foreign earnings are from the tax year 2006-07, the transitional provision operates so the money has to be enjoyed by the individual himself, that is, by Frank in this example. There is therefore no remittance under Condition C because although a gift-recipient (Jonni) has brought qualifying property (the £3,000) to the UK it is not enjoyed by the individual (Frank).

Paragraph 87 Finance Act 2008

When applying ITA07/s809N to a gift of money or other property after 6 April 2008 that is, or that is derived from, the individual’s pre 6 April 2008 foreign income or gains, the wider definition of ’relevant person’ does not apply. So the definition of gift recipient in these circumstances may include relevant person, that is, the individual may gift their foreign income or gains to another relevant person.

This means that so far as foreign income or gains of a taxpayer that arose or accrued before 6 April 2008 are concerned, references in Condition C (ITA2007/s809L(4)) to a ‘gift recipient’ may include ‘relevant persons’ such as a spouse, civil partner, minor child or grand child.

Example 2

In July 2011 Brenda, a remittance basis user, makes a gift of £6,000 offshore of her pre-6 April 2008 foreign chargeable gains to her husband, Clive. In October 2013 Clive decides to bring the £6,000 to the UK.

Usually Clive would be a relevant person (Conditions A and B) in relation to Brenda so could not be a gift recipient (Condition C) in respect of her foreign income or gains. However because the foreign chargeable gains in question accrued before 6 April 2008 Brenda’s gift of £6,000 to Clive makes him a gift recipient (in relation to this £6,000 only).

This means that the £6,000 is considered as the ‘qualifying property of a gift recipient’. However because these are pre 6 April 2008 chargeable gains there will only be a taxable remittance by Brenda if she receives, uses or enjoys this qualifying property in the UK.