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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Amounts Remitted: Mixed Funds: Example 2 - sale proceeds

In Year 1 Jason purchases shares in a foreign company for £8m. The £8m is accepted as representing Jason’s ‘clean’ capital, being perhaps an inheritance or similar such windfall.

In Year 3 Jason later sells the shares for £10m, which produces a £2m chargeable gain. The sale proceeds are credited in Year 3 to his overseas bank account that contains some relevant foreign income from the last two tax years, but no other monies.

There is now a mixed fund, containing capital from Year 1, and a foreign chargeable gain from Year 3 and some relevant foreign income from Years 2 and 3.

Later in Year 3 Jason, a remittance basis user, brings £5m to the UK from that account. The ordering rules in ITA07/s809Q mean that all of the relevant foreign income and the £2m gain from Year 3 is treated as remitted before any of the capital can be considered as remitted.

If the mixed fund also included other amounts of income or capital gains for that tax year (Year 2 or 3), those amounts must also be taken into account before any of the ‘capital’ element of the proceeds, (that is the £8m that is not a gain) realised by the sale of shares can be considered.