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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Identifying Remittances: Condition D: Connected operation - definition

A ‘connected operation’ means an operation which is effected:

(a) with reference to a qualifying disposition RDRM33420, or

(b) with a view to enabling or facilitating a qualifying disposition.

Broadly this means that a connected operation occurs where a relevant person RDRM33030 usually but not necessarily the taxpayer - agrees with someone else (who is not a relevant person) that instead of the taxpayer dealing with his or her foreign income or gains in such a way as to result in a remittance under Conditions A and B RDRM33100, the other person will use their own property to provide an advantage to the taxpayer in the UK and in return will themselves benefit from the taxpayer’s income or gains.

In detail, this means that for a connected operation to arise the taxpayer (or relevant person) must make a qualifying disposition RDRM33420.

Also the taxpayer (or other relevant person) will arrange with another person (who is not a relevant person) that property of that other person (which is not itself qualifying property of a gift recipient) RDRM33260:

  • will be brought to, received or used in, the United Kingdom, and enjoyed by a relevant person
  • is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or
  • is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt.

The property that is brought to the UK, or used outside the UK as consideration for a service or in respect of a relevant debt must not be qualifying property of a gift recipient as this will fall within Condition C. However this restriction relates to the property not the individual, so the same person may be a gift recipient under Condition C RDRM33200 and, in other transactions, ‘a person whose property is used’ under Condition D.

It is important to note the words ‘with reference to’ and ‘with a view to enabling or facilitating a qualifying disposition’. The nature of the link between the connected operation and the qualifying disposition, or even which comes first, is not specified. This means that a taxpayer cannot avoid a charge to tax by setting up complex structures to disguise foreign income or gains, or to try and ’break the link’ between something enjoyed in the UK and that income or those gains.

Where a ‘connected operation’ is present and the other terms of Condition D are met, there is a remittance of the taxpayer’s original foreign income or gains and tax is charged accordingly.

For more on relevant debts refer to RDRM33040 Relevant debts