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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Identifying Remittances: Condition D: Condition D - Connected operations - overview

Condition D is a stand-alone condition. It can apply independently of Conditions A and B RDRM33100, and Condition C RDRM33200. Very broadly the purpose of Condition D is to tax foreign income or gains which are used to provide property or services which are enjoyed in the UK as a result of indirect or ’reciprocal’ arrangements which fall outside the scope of Conditions A and B, or Condition C.

It is an anti-avoidance measure and if you consider it might apply to any case you have under enquiry you should refer the case, with a full detailed submission to the Specialist Personal Tax, PTI Advisory - Remittance Basis Technical Team before comment is made to any individual or advisor. These pages are designed to provide you with an awareness of the rules only.

A connected operation RDRM33430 takes place where a taxpayer gives property (including money) to some other person, and in doing so there is an ‘expectation’ for other property or money to be given in return, or for a service to be provided in the UK for the individual’s or another relevant person’s RDRM33030 enjoyment.

This type of arrangement is sometimes referred to as ‘offshore alienation’.

Condition D applies where:

  • a relevant person makes a ‘qualifying disposition’
  • the disposition is made to someone who is not a ‘relevant person’ or a ‘gift recipient’ and
  • any disposition is of money or property that is, or that derives from, the individual’s foreign income or chargeable gains, and
  • the qualifying disposition is made to a person who then uses some other property in such a way that a relevant person enjoys that property because the property is:

    • brought to, received or used in the UK by the relevant person, or
    • used as consideration for a service enjoyed in the UK by the relevant person, or
    • used outside the UK in respect of a relevant debt, and
  • there is a connected operation, that is an operation or arrangement effected with reference to the ‘qualifying disposition’ or in order to enable or facilitate that qualifying disposition.

The effect of Condition D is that taxpayers cannot arrange their affairs so that they avoid making a taxable remittance of foreign income and gains by agreeing with another person who is not a ‘relevant person’ (so that Conditions A and B) apply, or a ‘gift recipient’ (so that Condition C applies) that property, including money of the other person is brought to the UK for the benefit of the taxpayer or any other ‘relevant person’.

Where Condition D applies, foreign income and gains of the taxpayer are treated as having been remitted to the UK.