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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Remittance Basis up to 6 April 2008: Form of Remittance: Credit cards and Debit cards

Credit card issued in the UK

If a taxpayer who is chargeable on the remittance basis uses a UK credit card to pay for goods or services, either in the UK or overseas and he or she subsequently settles their credit card bill using foreign income or gains, the payment is a taxable remittance.

The remittance does not have to be received in the UK by the taxpayer, it is sufficient that it is received by the credit card company in the UK.

Credit card issued by an overseas bank or other financial institution

Where an overseas credit card is used in the UK, the cardholder is effectively authorising the credit card company to pay the bill for the goods or service in just the same way as if they had instructed the bank to make a payment directly to the person supplying the goods or services.

The terms of credit card agreements may differ as to the moment of ‘indebtedness’ between the cardholder and the credit card company. However the use of the credit card to pay for goods used or received in the UK, or services provided in the UK by, to, or for the benefit of a relevant person will create a debt.

The use of the individual’s untaxed foreign income or gains to pay the credit card company in respect of the debt will be a taxable remittance.

Interest and other such charges should be apportioned accordingly between UK and non-UK goods and services. In most cases a straight proportional split of the interest against each type of expenditure will be acceptable; for example if £400 of the debt relates to UK goods which are taxed as a remittance and £600 to non-UK goods and there is an interest charge in relation to that £1,000 debt of £10, then £4 of the interest is also a taxable remittance. However some cards may apply different rates where cash is withdrawn, or depending of date of purchase, in which case the taxpayer will need to compute the interest due on the ‘relevant debt’ part of the payment only.

Note 1: This section may apply to any credit card debt which the individual satisfies using their foreign income or gains, even if they are not the cardholder.

Note 2: If an overseas credit card is used abroad and the account is settled direct to the card company out of overseas income, no liability to UK tax will arise. But if an asset purchased using the card is brought to the UK and subsequently sold here, there will be a taxable remittance, at the date of disposal, up to the amount of any foreign income used to settle the original account.

Debit card issued by an overseas bank or other financial institution

Payments for goods or services that are made using a debit card (for example a Visa debit card or one issued under the brand name ‘Cirrus’) issued by an overseas financial institution are treated in exactly the same way as a cash transaction.

This means that when goods or services are purchased in the UK using a debit card, a taxable remittance is made to the extent of the amount of any overseas income or gains in the bank account. Likewise any cash withdrawals from shops or ATM machines in the UK are taxable cash remittances.

Payment by cheque drawn on an overseas account or by electronic transfer of any kind are also treated in exactly the same way as cash and are potentially taxable remittances of overseas income and gains.