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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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HM Revenue & Customs
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Remittance basis: amounts remitted: remittances of 'nominated' income or gains: application of ordering rules to remittances of nominated income or gains

 

For tax years up to 2011-12 the section 809J ordering rules start to apply from the first tax year in which the individual remits any of their ’nominated income or gains’ (ITA07/s809I), and continue to apply in each subsequent tax year. These ’nominated income and gains’ include all foreign income or gains nominated by the individual under ITA07/s809C as comprising the remittance basis charge (refer to RDRM32320 Making a nomination).

For tax years from 2012-13 unless the amount of remitted nominated income exceeds the £10 cumulative total for any tax year there is no need to apply the ordering rules explained below.

The nominated income or gains that are remitted, and so ‘trigger’ these ordering rules may include nominated income or gains from the tax year in which the remittance of nominated income or gains was made, and/or any earlier tax year in which a nomination was made.

It does not include any income that has merely been treated as nominated by the legislation (ITA07/s809H(4)) in order to produce the remittance basis charge, (refer to RDRM32360 Insufficient nomination).

However the ordering rules only apply if the individual also has any un-remitted foreign income and gains from years after 6 April 2008 in which they used the remittance basis that have not been taxed in the UK. Foreign income and gains of the individual other than nominated income and gains are called ‘remittance basis income and gains’. These include foreign income or gains from years in which the remittance basis was used under ITA07/s809D or ITA07/s809E where no nomination is required.

Example

Lynne has foreign income or gains, and uses the remittance basis as follows:

  Foreign chargeable gains Relevant foreign income - Spain Relevant foreign income - France Nomination
         
2010-11 £250,000 £75,000 £200,000 £75,000 RFI from Spain
2011-12 £300,000 £80,000 £120,000 £75,000 RFI from Spain
2012-13 Nil £40,000 £10,000 Uses section 809D
2013-14 Nil £80,000 £250,000 £75,000 RFI from Spain
Totals £550,000 £275,000 £580,000  

In 2012-13 Lynne brings into the UK all of her Spanish relevant foreign income from that year, plus £9,000 of her French relevant foreign income. In that year her un-remitted foreign income and gains are below the £2,000 threshold so she is able to use the remittance basis without paying the remittance basis charge (under ITA07/s809D).

In 2013-14 Lynne nominates a further amount of £75,000 that is again her relevant foreign income from Spain. This means that in total she has nominated and paid UK tax on £225,000 of her foreign income. In that tax year (the ‘relevant tax year’ - refer to Step 1 of the ordering rules RDRM35130) Lynne remits £50,000 of the Spanish relevant foreign income that she nominated in 2010-11. The ordering rules are triggered.

Lynne’s ‘remittance basis income and gains’ are the total of her foreign income and gains that remain outside the UK in 2013-14 (and that have not been nominated). That is £1,131,000:

  Foreign chargeable gains Relevant foreign income - Spain Relevant foreign income - France
       
2010-11 £250,000   £200,000
2011-12 £300,000 £5,000 £120,000
2012-13     £1,000
2013-14   £5,000 £250,000
Totals £550,000 £10,000 £571,000

Lynne has remitted nominated income to the UK when she has ‘remittance basis income and gains’ still outside of the UK. The ordering rules in section 809J are triggered.

As a result of applying the ordering rules Lynne is treated as having remitted in 2013-14 some of her foreign income or gains that have not been nominated instead of the £50,000 Spanish RFI that she did remit which is treated as if it had not been remitted. Income tax or capital gains tax is chargeable according to what is ‘deemed’ to have been remitted under the ordering rules (ITA07/s809I(2)).