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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Amounts Remitted: Offshore Transfers: Mixed Funds - Anti-avoidance provisions

ITA07/s809S applies in those cases where there is an arrangement, the main purpose, or one of the main purposes of which is for the taxpayer to obtain a tax advantage. This means that an individual arranges their affairs so that the amount of foreign income or gains they are regarded as having remitted under the terms of s809Q and s809R is reduced.

The practical effect of this provision is that any such arrangement is ignored so that a ‘mixed fund’ is regarded as containing the same amounts of foreign income and chargeable gains that would have been present if the arrangements had not been made. This is subject to a ‘just and reasonable’ test in s809S(2).

ITA07/s809S applies only to income or capital within ITA07/s809Q(4)(f) to (i). That is:

  • employment income subject to a foreign tax
  • relevant foreign income subject to a foreign tax
  • foreign chargeable gains subject to a foreign tax
  • income or capital not within another paragraph of s809Q(4)

ITA07/s809S(3) of the legislation states that an ‘arrangement’ includes any scheme, understanding, transaction or series or transactions (whether or not enforceable).

An ‘income tax advantage’ has the same meaning as ITA07/s683.

A ‘capital gains tax advantage’ means (ITA07/s809S(5)):

  1. a relief from capital gains tax or increased relief from capital gains tax
  2. a repayment of capital gains tax or increased repayment of capital gains tax
  3. the avoidance or reduction of a charge to capital gains tax or an assessment to capital gains tax, or
  4. the avoidance of a possible assessment to capital gains tax.

A full report should be made to Specialist Personal Tax, PTI Advisory , Foreign Income and Remittance Basis Team for any cases where ITA07/s809S may be applicable, or where representations are made by a taxpayer that refer to the ‘just and reasonable’ provisions in s809S(2).