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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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Remittance Basis: Amounts remitted: Quantification: Conditions A and B - remittances of foreign income or chargeable gains

Note: See below for remittances that involve relevant debts (ITA07/s809L(3)(c)).

Where Conditions A and B of ITA07/s809L apply:

If the property that is brought to or used in the UK is the foreign income or chargeable gains, the taxable amount is the amount brought to, received or used in the UK (ITA07/s809P(2)). Refer to RDRM33140 Condition B - direct remittances of income or gains.

If the service or consideration for the service provided in the UK is the foreign income or chargeable gains, the taxable amount is the amount of the service, or used as consideration for the service. In practice it will be very rare for the service provided to actually ‘be’ the foreign income or gains, so these chapters deal only with consideration for the service.

The most common taxable remittances of this kind occur where cash money is brought to the UK or an electronic transfer of funds to a UK bank account is made; the amount of the remittance is the amount of the cash/transfer that equals the foreign income or chargeable gains.

Where money is remitted, the taxable amount is the value of that money. Where the money is in a foreign currency (refer to RDRM31190 Exchange rates) the taxable amount is the pounds sterling value of the foreign currency.

When taken together with any amounts that have been previously remitted (or treated as having been remitted), the taxable amount of income or gain that is treated as having been remitted because of these provisions cannot be greater than the amount of the original foreign income and gains.

Example 1

Frederick is a remittance basis user (refer to the earlier examples). His foreign employment income is paid directly by his employer into his Austrian bank account. Frederick’s wife Freda uses a cash machine in Edinburgh to withdraw £400 from that account to purchase some textbooks. Here the property remitted (the cash) is the foreign income; the amount remitted is £400.

Frederick’s wife later uses a debit card from the Austrian bank account to purchase more textbooks for £200 from Edinburgh’s bookstores. Again the property remitted is the foreign income and the amount remitted is £200.

Example 2

During tax year 2009-10 Olivia, a remittance basis user, pays £8,000 of her relevant foreign income directly into her Jersey account. In the following tax year she transfers £6,000 of this into her UK bank account. The property remitted is the foreign income and the amount remitted is £6,000.

Example 3

Francine, a remittance basis user, has some extension work done on her house in Brighton by Paulo, a specialist contractor from Spain (refer to the earlier examples). This is a service provided in the UK. The invoice from Paulo totals £40,000.

Francine has £20,000 in her French bank account, which consists entirely of her relevant foreign income. Francine pays all of this money to Paulo’s overseas account. The remainder of the invoice is settled by Francine using her UK employment income.

The amount of the taxable remittance is £20,000 as the ’consideration’ (the payment by Francine) for the service (Paulo’s building work) is, in part (£20,000 out of the £40,000 total), Francine’s foreign income.

Example 4

Henri, a remittance basis user, gives £1,200,000 of foreign chargeable gains to a non-resident trust of which he and other ‘relevant persons’ are beneficiaries.

The trustees (relevant persons) then purchase a UK house for £1,200,000 in which Henri and his family live. The amount of the remittance is equal to the amount of gains used that is £1,200,000.