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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Amounts Remitted: Offshore Transfers: Offshore transfers - composition of a mixed fund

Broadly, an ‘offshore transfer’ is a term used to describe any transfer from a mixed fund that does not require the ordering and identification rules in ITA07/s809Q to be applied to it.

This will often be because no money or other property is brought to the UK, so Condition A in section 809L is not met, for instance when funds are moved from an account which is a mixed fund to another offshore account. Another example might be where money from a mixed fund is spent outside the UK without there being any advantage or benefit in the UK.

An ‘offshore transfer’ takes place if an amount identified as forming part of a mixed fund is moved, spent or otherwise transferred in such a way that, at the end of the relevant tax year, it is not, or on the basis of the best estimate that can be made at the time will not be, regarded as ‘remitted’ to the UK under Conditions A and B of ITA07/s809L (ITA07/s809R(5) and (6)). If such a remittance does happen in the year, so that the ‘offshore transfer’ rules cannot be applied then the rules at ITA07/s809Q apply instead.

The phrase ‘offshore transfer’ should be read with caution; for example the application of a mixed fund of income or gains outside of the UK as consideration for a service provided in the UK (refer to RDRM33100:Conditions A and B - overview) or in respect of a relevant debt is not an ‘offshore transfer’ within the meaning of ITA07/s809R. That is because consideration for a service or a payment that is made in respect of a relevant debt are both taxable remittances within Conditions A and B and are dealt with under ITA07/s809Q.

Where a transfer is made from a mixed fund that is partly a ‘remittance’ transfer to which s809Q applies and is also in part an offshore transfer to which s809R(4) applies, the rules in s809Q are applied first (ITA07/s809R(8)).

Where more than one transfer takes place the ordering rules in s809Q are applied successively. This means that those income/gains that are identified as having been used to make the first transfer are excluded from the second transfer etc (ITA07/s809R(9)).

Any foreign income and gains used by a taxpayer to make an offshore transfer from a mixed fund are taken into account when determining the extent to which a remittance from a mixed fund consists of income, chargeable gains or capital. To decide this it is necessary first to ascertain the composition of a mixed fund and the amounts and types in income, gains or capital contained therein.