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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: Example 1 - Continued

Moving forward, in 2014-15 Alexandria has relevant foreign earnings of £80,000, but no other foreign income or gains. She decides not to use the remittance basis in that year.

In 2014-15 Alexandria actually brings into the UK;

£5,000 Jersey relevant foreign income that she did not nominate in 2013-14 (Note 1)

£80,000 relevant foreign earnings from 2013-14 and

£80,000 relevant foreign earnings from 2014-15

Although Alexandria is not using the remittance basis in 2014-15, the ordering rules at ITA07/s809J are still required to determine what she is to be taxed as having remitted in that year. The relevant year is 2014-15.

Ordering rules at 2014-15

Step 1 – Identify nominated income and gains remitted in  the relevant year (2014-15) £nil Relevant Amount £85,000
     
     
  Identify the remittance basis income and gains remitted in the relevant year £85,000 (refer to Note 2)
  Step 2 - Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the relevant tax year  If  the remittance basis was not used in that year (that is sections 809B, s809D or s809E did not apply), treat those amounts as nil and go to step 6 Nil
       
  Step 6 - If the relevant amount is not nil, start again at step 2.  Take the reference to ‘relevant year’ to be a reference to foreign income of gains of the individual for the earliest ‘appropriate year’ previous to the lat tax year from which Step 2 was undertaken    
  Step 2 - Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the appropriate tax year (2013-14) (refer to Note 3) Para (d) Foreign chargeable gains (not subject to a foreign tax) £65,000
  Step 3 - Identify the earliest of paragraphs (a) to (h) above for which the amount determined in Step 2 is not nil Para (d) £65,000
  Step 4 - Where the relevant amount  is greater than the amount identified above the relevant  amount is reduced by the amount identified Relevant Amount reduced to: £85k less £65k = £20,000
  Step 5 - If the relevant amount is not nil go back and repeat Step 3. Take the reference to the first of paragraphs (a) to (h) as a reference to the earliest paragraph not previously taken into account under Step 3    
  Step 6 - If the relevant amount is not nil after Steps 3 - 5 have been completed for the year, start again at step 2.  Take the reference to ‘relevant year’ to be a reference to foreign income of gains of the individual for the earliest ‘appropriate year’ previous to the lat tax year from which Step 2 was undertaken    
  Step 2 - Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the appropriate tax year (2012-13) Para (a) Relevant foreign earnings (not subject to a foreign tax)  
  £280,000        
  Step 3 - Identify the earliest of paragraphs (a) to (h) above for which the amount determined in Step 2 is not nil Para (a) £280,000    
  Step 4 - If the relevant amount  is less than the amount identified, treat the whole of the remaining amount of the transfer as coming from that item of income or gain        
           

So in 2014-15 Alexandria is treated as having remitted

£20,000 relevant foreign earnings
   
£65,000 foreign chargeable gains

NB - The £80,000 relevant foreign earnings from 2014-15 that she brings in will be taxed on the arising basis in that year.

Note 1 - In 2013-14 Alexandria has £80,000 of Jersey relevant foreign income, of which £75,000 were nominated; if this £80,000 were all in the one single account, and there was nothing else in the account then, under the principle of this section the first £5,000 remitted in 2014-15 is accepted as being ‘not-nominated’ income.

In this example it is of little practical difference because the s809J ordering rules have already been ‘triggered’ in 2013-14 by her remittance of nominated income (from 2010-11).

But if the ordering rules had not already been triggered, then because, this £5,000 Jersey relevant foreign income in 2014-15 can be accepted as being ‘un-nominated’ income first and foremost, so Alexandria’s remittance of this £5,000 would not, of itself, have triggered the s809J ordering rules in this year.

Note 2 - Alexandria’s remittance basis income and gains are her total foreign income or chargeable gains for all tax years up to the ‘relevant tax year (2014-15) in which she used the remittance basis under section 809B, section 809D or section 809E. It therefore excludes her relevant foreign earnings from 2014-15 because she is not using the remittance basis in that year.

Note 3 - the ‘foreign income and gains ‘for’ the appropriate year exclude any:

  • ‘nominated’ income or gains, or
  • income or gains that were actually remitted to the UK before the beginning of the appropriate tax year or
  • income or gains that were treated as remitted to the UK previously under section 809J before the beginning of the appropriate tax year.

In Alexandria’s case, the £5,000 Jersey relevant foreign income from 2013-14, and the £80,000 relevant foreign earnings from 2013-14 that she actually remitted in 2014-15 were treated as having been remitted in 2013-14 by the ordering rules (refer to the earlier part of example 1 RDRM35150).

Summary

  2010-11 2011-12 2012-13 2013-14 2014-15  
             
Foreign chargeable gains Accruing in year £250,000 £300,000 £Nil £130,000 £Nil
Actually brought to UK £Nil £140,000 £Nil £Nil £Nil  
Treated as remitted £Nil £Nil £Nil £130,000 £Nil  
Relevant foreign income Nominated Arising in year £75,000 £75,000 £75,000 £75,000 £Nil
Actually brought to UK £30,000 £Nil £Nil £Nil £Nil  
Treated as remitted £Nil £Nil £Nil £Nil £Nil  
Relevant foreign income            
Not nominated Arising in year £Nil £5,000 £Nil £5,000 £Nil  
  Actually brought to UK £Nil £Nil £Nil £5,000 £Nil  
  Treated as remitted £Nil £Nil £Nil £5,000 £Nil  
  Relevant foreign earnings Arising in year £200,000 £120,000 £280,000 £150,000 £80,000
  Actually brought to UK £Nil £Nil £Nil £130,000 £80,000  
  Treated as remitted £Nil £Nil £20,000 £150,000 £Nil