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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Amounts Remitted: Mixed Funds: Remittances from mixed funds - definition of 'mixed fund'

A mixed fund is an overseas fund of money and/or other property which contains or consists of more than one type of income or gains, and/or income or gains from more than one tax year.

Although the rules refer to a ‘fund’ the legislation is not limited to something as simple as a bank account. A mixed fund might be an asset, for example a painting or other such property that derives from foreign income or gains (refer to RDRM33150 Condition B - remittances derived from income or gains). This is regarded as containing the foreign income and gains that were used to purchase the property, and so is taxable in the same way as that foreign income or gains (ITA07/s809R(2)).

In order to identify and determine whether there has been a remittance from a mixed fund within the terms of ITA07/s809L the definition of a mixed fund is at s809Q(6):

‘In this section “mixed fund” means money or other property which, immediately before the transfer, contains or derives from

more than one of the kinds of income and capital mentioned in subsection (4) or,  

income or capital for more than one tax year.'   

This means that mixed funds include:

  • an asset (property) that is, or is acquired with or otherwise derives from the foreign income or gains listed below, or
  • assets acquired using mixed funds - for example, houses, cars, works of art and shares in companies
  • an overseas account that was set-up using funds from money or property that is or was a mixed fund
  • an overseas account that includes more than one of the following kinds of income and/or gains:
  1. employment income (including UK employment income)
  2. relevant foreign earnings not subject to a foreign tax
  3. foreign specific employment income not subject to a foreign tax
  4. relevant foreign income not subject to a foreign tax
  5. foreign chargeable gains not subject to a foreign tax
  6. employment income subject to a foreign tax
  7. relevant foreign income subject to a foreign tax
  8. foreign chargeable gains subject to a foreign tax
  9. any other amount of income or capital not included in one of the previous categories
  • .

Note 1 - Remember that a ‘remittance’ under Conditions A and B includes occasions where income or gains are applied outside the UK, for example as consideration for a service where it is the service that is provided in the UK (refer to RDRM33130 Condition A - provision of a service), and in respect of a relevant debt (refer to RDRM33160 Condition B - relevant debt).

Note 2 - A ‘mixed fund’ does not exist just because the individual has several accounts with the same banking institution, if each account is separately constituted and contains only one of the relevant types of income from only one year. This will usually include bank accounts set up as sub-accounts under an ‘umbrella’ agreement. Also refer to the next page.

Note 3 - In ITA07/s809(Q), the words ‘immediately before the transfer’ are important and should be noted. This means that once all of the foreign income and gains in the fund have been identified (using the ‘steps’ in s809Q(3)) as remitted by a relevant person, unless additional amounts of income and gains are credited to the mixed fund, the next transfer of funds will be capital.

Note 4 - Subject to a Foreign Tax 

‘Subject to a foreign tax’ usually means that the individual has actually paid some tax on the foreign income to a foreign tax authority. This is usually the tax authority of the country in which the income is earned or the gain accrues. It might on occasion include intra-government agencies, for example some European institutions impose a tax on its officers and employees that stands in place of countries’ own fiscal provisions.

Further, actual payment of an amount of tax might not always occur; for example, if small levels of foreign income are involved there might be nothing due to be paid on part or all of the income, as a result perhaps of a foreign countries’ own personal allowances systems, or similar tax provisions which are akin to such allowances, such as a tax rate band of 0 per cent. Such income would still be considered to be ‘subject to a foreign tax’.