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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Amounts Remitted: Offshore Transfers: Composition of a mixed fund - debts

Where any part of a debt relating to property is directly or indirectly repaid from income or capital, in whole or in part, or from anything derived from income or capital, the property is treated as consisting of or containing that income or gains (ITA07/s809R(3)).

The practical effect of this provision is that income or capital in a mixed fund that is used to pay either the interest or the principal amount of a loan that is related to property remains subject to the ordering rules in s809Q(3) and is taxable as a remittance.


On 6 April 2013 Steffan takes out an offshore loan of £70,000 to purchase some antiques overseas. He repays the loan over 2013-14, using £30,000 of his relevant foreign earnings and £15,000 of his relevant foreign income for that year; the remainder is paid from his inherited ‘capital’. The antiques are treated as consisting of or containing the income and capital used to pay the debt.

At the end of s809R(3) appear the words ‘if and to the extent that it is just and reasonable to do so’. If any taxpayer makes representations that rely upon these words, a full report should be made to Specialist Personal Tax, PTI Advisory, Foreign Income and Remittance Basis Team before a decision is reached.

Refer to RDRM35470 for example